M&A Outlook Remains Volatile

Following data released by the Office for National Statistics (ONS) last week, which revealed that UK M&A deal volume and value had dropped by nearly 30 per cent in the third quarter, the outlook continues to be volatile.

A recent M&A tracker, which is compiled in association with the M&A Research Centre at Cass Business School, London, reports that global macro-economic uncertainty and volatility is taking its toll on UK M&A activity, meaning that the downturn could increase into Q4 and on into next year.

The rest of Europe is not faring well either, with Europe as a whole seeing fall of 39 per cent in terms of total announced transaction value during Q3 2012, with announced transaction volume dropping by 24 per cent quarter-on-quarter.

Countries in the Eurozone announced a fall in transaction in this quarter, by 28 per cent in terms of both volume and value. However, despite this trend, the second largest transaction announced in Q3 2012 was intra-European, namely Volkswagen’s offer for Porsche.

While following a 13 per cent quarter-on-quarter increase in announced transaction value Asia surpassed Europe in terms of the total number of announced transactions for the first time since the tracker began in 2010.

However, this is less likely to be a reflection of a long-term shift and more a result of the economic uncertainty in the Eurozone temporarily depressing M&A volumes.

Given that the average time it takes to complete a deal in the UK rose to an all-time high of 40 days in the third quarter, it would appear that caution is the watchword, meaning that the number of deals is unlikely to increase in the near future while the economic climate remains as volatile as it is now.

As an accountant, Philippe Herszaft specialises in offering advice, support and guidance in regard to business acquisitions and mergers.