M&A market update: Is volatility the new norm?

We are seeing signs of growth in the UK mergers and acquisitions (M&A) market but with continued fragility and sensitivity in the debt markets: does this suggest that volatility is the new norm?

Stuart McKee, UK Head of Corporate Finance, Sean Williams, UK Head of M&A, and Nick Atkinson, Head of Debt Advisory, discuss this and other issues in this latest M&A Market Update.

Read the transcript.

The UK M&A market continues to show signs of improvement. In the 12 months to 30 June 2011 there were 3,442 UK announced deals with a total deal value of £160,405.8m*, an increase of 4.7% by volume and 38% by value on the prior year.

Trade acquirers, including International businesses, with strong balance sheets have emerged as serious competition in transactions of all sizes. Corporates are returning to acquisitions to help deliver their growth plans, and by factoring in synergies, favourable exchange rates and the opportunity to de-risk by expanding into Western Europe, they are very credible purchasers. That said and despite record levels of equity in funds it continues to be an extremely challenging environment in which to complete transactions.

The dynamic conditions seen earlier in the year in the debt markets have changed. There is little to no liquidity in the larger end of the market where the 17 deals that were completed in May and June all remain unsold due to pricing expectations. Funding is however, still available in the mid-market for businesses of scale with credible growth plans and strong management. Indeed businesses with these characteristics are continuing to attract high multiples.

So despite the new norm of volatility in the market there are still buyers around and funding is available to get deals done but realistic price expectations, robust preparation for market conditions and looking internationally is key to getting deals done.

*according to Thomson Reuters