UK M&A deal volume and value drops by nearly 30% in Q3 of 2012 according to EY’s M&A Tracker

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  • Global  volume and value of deals fall by 18% and 11% respectively
  • Announced transaction values fall by 39% in Europe
  • Average time it takes to complete a deal in the UK rises to all time high of 40 days

Global macro-economic uncertainty and volatility is taking its toll on UK M&A activity, with both the volume and value of announced deals dropping by 28% in the third quarter of 2012.

Hopes of a sustained uptick in activity from the previous quarter’s improved numbers - 13% increase in volumes and 22% increase in values - were short lived, suggesting that a prolonged slowdown in M&A could well continue into the final quarter of this year and beyond, according to the EY M&A Tracker, released today.

Globally volume and value of announced transactions fell by 18% and 11% respectively in the third quarter.

The EY M&A Tracker, is compiled by EY and the M&A Research Centre (MARC) at Cass Business School from six different transaction data sources, which are consolidated and compared to activity levels in Q1 2010 using a proprietary weighted-average methodology.

The only certainty is continued volatility

Jon Hughes, UK & Ireland Transaction Advisory Services Leader at EY, says: “The more positive outlook we saw earlier this year has dissipated, as the year has progressed the mood has cooled. The only certainty at the moment is continued volatility and with this as a backdrop, appetite for deal making will remain subdued.

“But it’s not a bleak picture all over the world with some markets, including Asia, remaining active.”

All quiet on the European front

In a stark reminder of the region’s economic woes, Europe as a whole saw a fall of 39% in terms of total announced transaction value during Q3 2012, with announced transaction volume dropping by 24% quarter-on-quarter. Looking at the Eurozone specifically, announced transaction activity fell again in this quarter, by 28% in terms of both volume and value. Despite this trend, the second largest transaction announced in Q3 2012 was intra-European, namely Volkswagen’s offer for Porsche.

Following a 13% quarter-on-quarter increase in announced transaction value and for the first time since the start of the M&A Tracker in Q1 2010, Asia surpassed Europe in terms of the total number of announced transactions. This is, however, less likely to be a reflection of a long-term shift — rather a result of the economic uncertainty in the Eurozone temporarily depressing M&A volumes.

Deal completion period increases

The average time it takes to complete a deal in the UK rose to an all time high of 40 days in Q3, suggesting that there is a more moderate and cautious approach to completing transactions.

Hughes comments: “Post financial crisis there was a consensus that the unprecedented volatility would present rich pickings for those predatory acquirers with healthy levels of cash on their balance sheets. But today there appears to be a more moderate and cautious approach to M&A and the deals that are getting done are driven primarily by strategic plans rather than opportunistic actions – this is one of the factors leading to the increase in the time it takes for transactions to complete.”

On the horizon

Looking forward into the next quarter and beyond, Hughes says that many companies are adopting a cautious approach to deal making, waiting to see how the Eurozone crisis plays out over the coming months and when the volatility across the UK and global economies will stabilise.

“Leading corporates are now focussing more on optimising internal operations to drive growth, profit and volume in favour of acquiring assets. But when the tide does eventually turn, and we start to see calmer seas return to the UK and Eurozone, it’s these companies that will be in the strongest position to act and transact.”