The corporate finance arms of the Big Four last week unanimously changed tack in their predictions for the future. The firms now expect an imminent revival of corporate finance, for which signs are buried beneath the dreadful facts of their respective ongoing surveys.
KPMG heralded ‘the return of larger deals’ to the UK management buyout market. It drew this conclusion from a report that noted deal completion showed little improvement, while the average deal value dropped from £155m to £99m.
The survey further found that the total value of MBO in the second quarter of 2003 fell to £2bn, the lowest level since 2001 and less than half of the same quarter last year.
Deloitte & Touche also boasted a ‘mega deal revival’ in the international MBO market. But its report showed that the value of public-to-private deals were down, while exit deals have slumped by two thirds since 2002.
In the meantime, PricewaterhouseCoopers sees ‘better times ahead’ for the European IPO market, even though its latest IPO watch concludes that second-quarter IPOs are down two thirds from the year before. PwC dismissed the significance of this fall compared with last year by pointing to the fact that 2002 contained a few big deals.
It explained its confidence in the IPO market by comparing it with the first quarter of this year. True enough, compared to the previous quarter, IPOs have gone up in value and number of deals. But then again, this quarter was so bad that it seemed IPOs had come to a total standstill – from there, arguably, the only way is up.
KPMG and Deloitte, on the other hand, based their optimism on high activity in larger deals in June, which have been completed or are still in the pipeline.
This does give some reassurance for the second half of 2003, but maybe corporate financiers should remain cautious about sharing optimism with their clients. After a year where most hopeful predictions have led to disappointment, it could be unwise to raise hopes only to see them end in frustration – again.
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