Mergers and acquisitions: disposals

The full year figures for 2006 saw M&A activity in the UK continue to rise. At the end of the first quarter of 2007, ongoing private equity fundraising, benign debt markets and the steady return of corporates that are willing and prepared to compete with financial buyers, all point to healthy levels of activity continuing. This is the case across all sectors, with business services, financial services, technology, media and telecoms, and the consumer sectors showing particular strength.

These factors have also led to increasing competition amongst bidders prepared to pay premium prices and, as we have seen recently, there are now very few corporate targets that are immune from private equity interest.

The return of corporate buyers was fuelled in part by the strength of the stock market in the last quarter of 2006 – a trend that looks set to continue this year. According to the latest PricewaterhouseCoopers IPO Watch Europe Survey, 2006 was a record year for European IPOs, with many international companies choosing to list on UK markets rather than in New York. As a result, London finished top of the league.

Business confidence among UK chief executives is also at a record high. According to the recent PricewaterhouseCoopers Global CEO Survey, this optimism is largely due to a strong appetite for M&A activity, with nearly 60% of UK CEOs surveyed saying that they have completed a cross-border merger or acquisition recently or are planning one in the next 12 months.

Whether you are thinking of selling your family-owned company, disposing of an underperforming asset or non-core part of your business, or exiting a private equity investment, there are a range of financial, tax and strategic issues to be considered.

Issues that companies must address include:

• Considering the best time to start the process
• Optimising the growth story and assessing which buyers to approach
• Carrying out the necessary due diligence or vendor assistance
• Valuation
• Addressing any pensions, tax and legal issues (including legal responsibilities related to deal execution)
• Planning for post-merger integration after the sale

At PricewaterhouseCoopers, we have strong industry expertise and a proven track record of helping businesses to assess their strategic options. PwC’s specialists can work with organisations through every stage of the deal activity and, where necessary, we can advise clients on how to maximise value at sale.