Signs of recovery for mid-market M&A after sharp drop in 2009
08 January 2010
 The volumes and values of mergers and acquisitions (M&A) fell significantly last year but corporate finance advisors reckon the market could be on course for a recovery in 2010.
The number of announced M&A deal involving all British targets dropped by 23% to 2,086 deals in 2009, the lowest M&A volume since 1994, according to provisional figures analysed by business advisors Grant Thornton. Meanwhile, the total value of M&A deals announced in Britain dropped by 33% to £97.6bn.
David Brooks, the head of M&A at Grant Thornton said that M&A activity in 2009 turned out to be worse than the corporate finance fraternity had anticipated, but in the UK there were see grounds to be cautiously optimistic about mid-market M&A for 2010.
He said: “Aside from distressed M&A, there are a growing number of private company sales driven by a rising level of interest from acquisitive corporates and a somewhat improved funding environment.”
“Underlining growing optimism, Grant Thornton's lead advisory practice has advised on ten completed mid-market M&A transactions in the fourth quarter of 2009. In December alone, we have been appointed to advise on eight new mid-market deals.”
In 2009, the number of mid-market deals (deal value up to £150 million) dropped by 39% to 671 deals valued at £14.2 bn. But a quarterly analysis shows a steady improvement in the number of deals since the fourth quarter of 2008, with 196 deals announced in the fourth quarter of 2009, representing a rise of 11% compared to the previous quarter. The fourth quarter deal value amounted to £5.1 bn.
Brooks added: “We continue to believe that comparatively low valuations will fuel a consolidation drive in the mid-market. At the same time, we also see an increase in publicly-listed firms considering acquisitions.
“While 2009 was about repairing balance sheets with a strong focus on cash flow and profitability, 2010 will see an increase in acquisitive listed firms taking advantage of relatively low valuations. British firms are particularly attractive to foreign bidders because of the prevailing weakness of sterling.”
Foreign bidders only accounted for 610 acquisitions in the UK with a value of £42.2 bn in 2009, representing a 40% drop in deal volume compared to 2008, when 1019 foreign inbound acquisitions worth £72.3 bn were recorded. But a quarterly analysis indicates a rebound in the number of foreign acquisitions in the UK: 176 foreign deals with a total value of £14.1 bn were recorded in the fourth quarter of 2009 - 25% higher than the number of deals in the third quarter of 2009.
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