Life left in the M&A market despite crisis

Stock exchange

Holding up: the junior exchange is a vital stepping stone to other markets

Reports of the death of M&A may have been greatly exaggerated. Well,
that’s according to experts in the field grappling with the effects of the
credit crunch.

Despite the appalling statistics emerging over recent weeks, M&A
practitioners among the firms remain bullish about their prospects.

The death notices have been plentiful. Surveys show that the cash raised on
AIM in Q1 is down 40%, suggesting that listing on the alternative market has run
out of energy, while other figures reveal that private equity acquisitions in Q1
are also down significantly by about 19%.

So are there no deals to be had for corporate finance professionals? Look at
the numbers again. Overall Q1 saw 791 deals, down only around 10% on the
previous year, remarkable given the gravity of the credit crisis. And while
fundraising may have dropped off on AIM, actual listings have held up with 32,
around half of which had no money raising intention.

Why is all this significant? It shows the market in transition.

While private equity may have suffered, corporate buyers have become more
competitive and advisers from the accountancy sector expect to keep their
revenues up.

‘What is apparent is that the lower market, or mid market up to deals worth
£100m are still happening while there are very few deals above that,’ says Jon
Breach, M&A partner at BDO Stoy Hayward.

On AIM, the listings are taking place to put companies in a good position
ready for an upturn, meanwhile firms are focused on doing business with the
clients they already have.

Chiltern Taylor, Baker Tilly’s head of capital markets, remains certain that
there’s still business to be done. ‘We have 160 AIM clients. They’re growth
companies and likely to be involved in acquisitions and that’s where we can
still do business because that still requires our skills.’

Taylor also believes that expertise in Venture Capital Trust financing, where
an estimated £400m remains available for investment, will also help the firm
continue to generate business.

Back at BDO, Philipp Prince, a corporate finance partner, sees AIM as a
significant lead to other business. ‘If you are not playing in the AIM market,
you won’t get the leads to other capital markets,’ he said.

And other markets are where it’s at, with BDO focused on improving the firm’s
advice on what it sees as resurgent markets elsewhere around the world. ‘London
has seen its peak and other markets are coming back,’ he said. So, no funeral
rites yet for M&A.

Related reading

PwC office 2