M&A down but not out in Yorkshire

YORKSHIRE’S strong deals performance has come to an end and will take a while to recover to pre-credit crisis levels.

The region may also be one of the hardest hit by the economic downturn as a result of its successful finance and professional service sectors.

Those are just some of the predictions being made by corporate finance professionals as deal values and transactions continue to drop off.

Yet they are not united in their gloomy outlook. While most agree that deal levels are unlikely to recover until the second half of 2009, “survival” deals, non-core disposals and movement in the SME sector will ensure continued activity.

According to Rod Wilkinson, head of corporate finance at KPMG in Leeds, just 25% of transactions will be of a traditional M&A nature.

“M&A is certainly continuing albeit the market has changed recently meaning we will see transactions in the next 12 months of a fundamentally different nature to those of the last two years,” he said.

Research by business advisory firm Deloitte also suggests that more firms will be considering M&A as a cost-cutting exercise over the coming quarters as financial times get even tougher.

In a recent analysis of 150 transactions it found that overhead savings of 17% could be made as companies address duplicated costs such as IT and finance.

Richard Bell, head of transaction services for the North at Deloitte, said: “With deal activity taking a hit across both the private and public sectors, we are seeing a sharp increase in the number of forced consolidations taking place as a means to ensure survival.

“Sectors with scalable platforms, such as financial services, can show significant overhead cost synergies of around 30%, with significant average savings in their core business of 9%, primarily from migrating to shared platforms and eliminating duplicated IT costs and headcount.”

For a full in-depth analysis on the region’s M&A outlook click onto http://www.thebusinessdesk.com/yorkshire/news/6244-m-amp-a-and-yorkshire-don-t-get-too-depressed-just-yet.html