KPMG predicts continuing M&A decline

The UK is set to echo a global decline in deal-making activity, predicts accountancy giant KPMG.

The latest version of its Global M&A Predictor forecasts a continued fall in international M&A during the second half of 2008 due to a decreasing appetite for deals and rising problems in bringing them to completion.

The Predictor, which examines 1,000 companies’ estimated net-debt-to-EBITDA ratios and forward price earnings (PE) ratios, shows that deal levels and values for the remainder of the year would continue to fall, with corporate balance sheets also suffering.

The index predicts the largest fall of PE ratios recorded to date with corporate valuations decreasing 10.3 per cent, from 17 times to 15.3 times globally in the six months to June. Net-debt-to-EBITDA ratios also moving from 0.81 times to 0.93 times, indicating the capacity to drive deals through debt may soon be negatively impacted.

KPMG Corporate Finance global chair Stephen Barrett said these latest statistics suggest that the next 12 months will become increasingly difficult for deal-makers.

“Findings from our latest Predictor reveal strong evidence that market conditions for M&A transactions will continue to deteriorate,” he added. “We had hoped that the gradual decline seen earlier this year could be maintained, but now all indicators are pointing at a marked fall in the market across all regions and sectors.”

Marc Barber

Marc Barber

Marc was editor of GrowthBusiness from 2006 to 2010. He specialised in writing about entrepreneurs, private equity and venture capital, mid-market M&A, small caps and high-growth businesses.

Related Topics

Early Stage Funding