Friday 28th March 2008
Corporate defaults to stimulate M&A activity
Nearly two-thirds (64 per cent) of US and European corporate executives and financial advisers predict that an increase in corporate default rates will drive M&A opportunities over the next 12 months, according to a new report.
Research by Merrill Corporation and mergermarket.com found that corporate defaults are expected to rise in both the US and Europe by 70 per cent and 51 per cent of respondents respectively, although overall M&A activity is expected to fall.
In Europe, 81 per cent of respondents expect the value of deals to either decrease or remain the same in the next six months. In contrast, Asia is tipped to see the most M&A activity with around 40 per cent of respondents predicting a rise in both the value and volume of deals in the region.
Despite the credit crunch, the majority of corporate respondents in North America (63 per cent) and Europe (70 per cent) reported that they have not had difficulty in securing finance for M&A deals in the past six months. However, all respondents agreed that financing will be harder to come by over the next six months, and the majority (67 per cent) predicted that lending criteria will only start to relax in Q4 2008 or Q1 2009 at the earliest.
Current market conditions are also viewed as a major M&A opportunity for foreign corporates, particularly in North America, where over three-quarters (76 per cent) of respondents believe that the next 12 months will see cash-rich overseas companies entering their region to broker deals.
Over half of those interviewed (52 per cent) thought that sovereign wealth funds (SWF) were likely to increase their involvement in M&A activity over the next 12 months, but the jury is still out as to whether their involvement is welcomed. Two-thirds (67 per cent) of respondents believed that it depends on the specific circumstances of the transaction, including the amount of control an SWF takes and which industry sector is involved.
Marc Barber
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User comments by Daniel Antelo at Friday 28th March 2008
great read, thank you.