Global M&A lacklustre in H1, recovery seen in H2 – KMPG

13 January 2009 11:58  [Source: ICIS news]

By Bohan Loh

SINGAPORE (ICIS news)--The global mergers and acquisitions (M&A) arena is set to remain lacklustre through the first half of 2009 but deal activity should slowly return late in the year as liquidity improves and attractive value is recognised in certain sectors, financial consultants KPMG said on Tuesday.

“Findings from our latest Predictor confirm our view that 2009 will be a very subdued year for M&A activity,” said Stephen Barrett, Corporate Finance International Chairman at KPMG,

The KPMG Predictor is a forward looking survey of 1,000 leading companies’ estimated net debt to EBITDA (earnings before interest, tax, depreciation and amortisation) ratios and prospective price earnings ratios.

“We expect global deal volumes to continue to fall through to Q3 and, with less liquidity in the market and reduced debt market liquidity, appetite and capacity for doing deals will continue to decline,” he added.

Barrett’s comments come on the heels of Dow Chemical’s failed K-Dow Petrochemicals joint venture with Petrochemical Industries Company (PIC) of Kuwait that subsequently led to questions over the $18.8bn (€14.1bn) Rohm & Haas merger.

Despite the doom and gloom surrounding global markets, Barrett said that recovery in the M&A arena may happen in the second half of the year.

“However, our detailed analysis of the results of KPMG’s Predictor, coupled with historic M&A cycle trends, leads us to believe that there are indications that the corner may well be turned late in the second half of this year,” Barrett said.

“Within 12 months, I think we will start to see some clear signals of a slow, but purposeful, recovery in the M&A transactions marketplace,” he added.

Barrett also predicted that recovery in the M&A sector would find support by the close of 2010 and the industry would be able to look forward to a sustained recovery in transactional activity.

“In my view, the global M&A marketplace will be back in business,” he said.

($1 = €0.75)

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By: Bohan Loh
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