After flatlining, the UK merger and acquisition market has begun to show
signs of a gradual recovery.
The UK M&A market slowed last year and virtually ground to a halt last
September after the collapse of venerable US investment bank Lehman Brothers.
Any remaining credit dried up and buyers became nervous about the valuations
process and sceptical about the true worth of what they were buying.
But in recent months M&A specialists have reported an increase in
activity. Deals are being driven by four groups of investors: resilient
companies with strong balance sheets, rich private investors, private equity
firms and overseas investors.
However, many in the M&A market remain cautious.
‘There is a mismatch between vendor and purchaser expectations,’ said Steve
Bartlett, corporate finance partner at BDO Stoy Hayward.
‘Acquirers are seeking the Holy Grail of valuable assets bought at rock
bottom prices. We need to manage expectations. Eventually, most agree to
Most deals are being financed by shares, although debt finance is available
for some takeovers involving infrastructure companies that do a lot of work in
the public sector.
The technology and oilfield services industry have also been weathering the M
Rich individual investors in the US, Mainland Europe and the Middle East have
also helped funding British M&A deals. Some of these are real estate
acquisitions where valuations are at what many specialists consider to be
historic lows, according to experts.
Often, however, would-be buyers are struggling to get access to the kind of
financial data necessary to help them make an informed decision about whether to
buy a company.
‘The market is fearful because the data on which valuations are based is not
there,’ said KPMG partner David Simpson.
‘Buyers are cautious because they do not know if assets are worth, what is
being asked for them is accurate or whether they will be worth less in two
months’ time. Valuations are a major source of dispute in the current market.’
Some corporate finance experts said they remain cautiously optimistic. Ernst
& Young corporate finance partner Ken Williamson said: ‘Although banks are
really not present in most other sectors, we are close to a normal market in
infrastructure. Our practice is continuing to do well. I think the banks are
drawing confidence from the fact that the work is being backed by the
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