M&A slump to continue until 2010
Merger and acquisitions activity to be put on hold as firms seek out more bouyant markets such as insolvency
Merger and acquisition activity will hit rock-bottom this year but will
probably recover from 2010 onwards, a KPMG study says.
A slump in deals is likely to accelerate moves by the big firms to switch
staff from M&A to faster-growing areas such as insolvency.
Stephen Barrett, corporate finance international chairman at KPMG, said the
survey of 1,000 of the largest companies in the world, pointed to ‘a very
subdued year’.
‘With less liquidity in the market and reduced debt market liquidity,
appetite and capacity for doing deals will continue to decline,’ he said.
However, Barrett added that companies with cash in the bank would pick up
cheap assets and provide ‘clear signals of a slow but purposeful recovery’
within 12 months.
KPMG uses the ratio of net debt to earnings before interest, tax, depreciation
and amortisation (EBITDA) to forward price-to-earnings (PE) to judge a company’s
capacity to buy others.
At the end of November PE ratios had fallen 22% from six months earlier,
suggesting a reduced capacity to do deals, KPMG said.