Firms expect M&A activity to increase over next six months

29 March 2005

Tweet
Facebook
LinkedIn
Google plus
Send to

Over two thirds of FTSE 350 businesses expect an increase in UK M&A activity over the next six months, according to a new survey by PricewaterhouseCoopers, with a fifth predicting a major rise in their sector and just 10% foreseeing a decline in deals. Underlying the predicted increase in M&A is renewed corporate confidence, with 73% of respondents saying they would be confident to undertake a major acquisition in the next six months. More than half of the companies surveyed, however, would not be confident about making a major disposal, with over half citing concerns over valuation as the main reason. The PricewaterhouseCoopers UK Deal Confidence surveys 100 senior executives and tracks 'deal confidence' levels in order to assess likely trends in transaction activity. More than three quarters of respondents were at FTSE 350 companies, with the remainder at private companies with a turnover of over Â£300m. Overall, 41% describe their M&A strategy as 'acquisitive', 13% are planning for both acquisitions and disposals, while 39% state their focus will be on organic growth only. Some 96% of respondents felt confident in making smaller acquisitions, with 64% confident about smaller disposals.Value-for-money is the strategic factor of most concern to respondents, with 61% rating it of high concern. Other issues cited as being of high strategic concern included earnings/accounting implications (28%), post-deal integration (27%), and shareholder attitudes and criticism (21%). In terms of the macro-economic influences on corporate M&A confidence, factors considered a high or major concern included regulation (29%), exchange rates (25%) and interest rates (20%). Only 11% rated consumer debt increases a high or major concern, reflecting confidence in the UK consumer sector. Though not a macro-economic issue, pensions were cited as a high or major concern by 28%. The increasing role of private equity came through in the corporate responses, with 61% expecting increased competition from financial buyers, and less than 7% decreased private equity activity. One quarter of all respondents, and just over one third of FTSE 100 respondents, see private equity as a 'worrying threat'. Over one third see the leverage used by private equity houses as making it difficult to compete in auctions, the majority of which were FTSE 250 respondents, reflecting the greater competition private equity houses represent for mid-market quoted companies.