M&A Tracker Q3 2012

Executive focus

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In what can only be viewed as yet another quarter of global economic uncertainty, the third quarter of 2012 continued to pose difficulties for deal-making management teams.

“Today...the deals getting done are driven primarily by strategic plans rather than opportunistic actions.”
- Dave Murray, EY, EMEIA Transaction Advisory Services Markets Leader

The deal conversion rate is the rate at which deals convert from being announced to completed in a given time period. The rate of conversion can provide an indicator of how easily or difficult deal makers are finding it to complete their transactions.

We have seen the level of deals converting from announced to completed follow a decreasing trend over the last four quarters, this reflects the difficult market conditions that deal makers are facing.

In the nine months up to and including Q3, the volume of announced deals that completed in the same period dropped.

Conversion and completion rates for nine months up to and including Q3

Deals are taking longer to complete on average: currently 56 days, which represents an increase of 17% from Q3 2011. Larger transactions are more complex and consequently riskier, resulting in a higher risk of regulatory problems, shareholder activism against the deal, more due diligence risk and so on, all factors that have the potential to increase the time to completion and the risk of withdrawal.

A general lack of urgency as competition for assets is low, coupled with a continued valuation gap between buyer and seller, is likely to be driving this trend, with transaction negotiation and due diligence acting as stumbling blocks.

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