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Euro zone crisis hits M&A deals

Deal volumes remain depressed in relative terms, says EY research

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The euro zone debt crisis continues to discourage M&A activity as new research showed on Thursday that global volumes are well below average for the time of year.

In the second quarter of this year global M&A volumes were at their second lowest level since the first three months of 2010, and 26 percent lower than in the same quarter in 2011, according to Ernst & Young’s M&A tracker.

Compared to the first three months of this year however, global volume and value of announced deals during the second quarter were up by 10 percent and 18 percent respectively, EY said.

Total announced deal value in the UK rose by 22 percent in the second quarter this year compared to the previous quarter. The figure is 32 percent higher than it was in the first quarter of 2010.

Deal volumes remain depressed in relative terms despite a rise in deal volumes of 13 percent from 89 to 101, according to the study.

“The market uncertainty created by the euro zone crisis has led to many, who may have been considering M&A, to adopt a ‘wait and see’ approach. Buyers and sellers alike are being far more cautious and for some they are of the view that if they don’t have to sell they will sit on the asset until the landscape across Europe has stabilised,” said Jon Hughes, transaction advisory services leader at Ernst & Young.

He said however that the average deal value quarter on quarter had increased, reaching $285 million (£182 million).

The time it takes to complete a deal has also lengthened by 16 percent quarter-on-quarter and is now at its lowest level since the beginning of 2010, EY said. Only 38 percent of all bids announced completed in the second quarter, compared to 46 percent two years ago.

“Deals are taking longer and becoming increasingly difficult to complete, which increases the need for careful planning and diligence,” Hughes said.

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Euro zone crisis hits M&A deals
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