Upturn in activity in UK corporate finance market predicted

NEW research suggests that an appetite for mergers and acquisitions is starting to return.

KPMG’s latest Global M&A Predictor asserts that the confidence to undertake significant M&A activity is lifting faster in the UK than the global average.
 
In the UK, after the gloom of a double dip recession, forward price/earnings ratios have risen a healthy 15% in the last year suggesting companies have their appetite back. They also have the capacity to transact, as indicated by the forecast net debt to EBITDA ratio, expected to improve by 11% over the next year.
 
This compares to a 12% rise in confidence levels globally, backed by a significant 15% capacity improvement.
 
Over the last two years, the trend has been for steadily rising capacity – driven by companies’ focus on reducing debt – tempered by an equally steady decline in confidence.
 
The tides seem to be finally turning with confidence rising to match capacity. There is dramatic change compared to last summer when analyst predictions showed that appetite levels for M&A were falling across the board.
 
Christian Mayo, who heads KPMG’s Leeds Corporate Finance team, commented: “The outlook for 2013 is more positive than it has been for over two years as companies hunt for new opportunities.
 
“More stability in the global macroeconomic picture is sure to be feeding through into transactional confidence and capacity levels with the US elections over, the ‘fiscal cliff’ crisis averted, or at least deferred, while China has begun the transition to a new leadership team.  In the increasingly global deals market the impact, in terms of certainty, of such distant developments can be felt here in Yorkshire.
 
“After a prolonged period of negativity things are moving in the right direction for the M&A market.”
 
Commenting on the sector findings, Phil Abram, Head of Transaction Services at KPMG in Leeds, added: “The data’s uptick in appetite chimes with our experience on the ground, where we are seeing a number of opportunities, particularly in consumer goods.  With many large companies in this sector spinning off non-core business lines or seeking to tap into new high growth markets, we expect to see more deals this year after a busy period in which we advised on transactions involving Arla Foods, Symington’s and Daniels in Yorkshire.
 
“Globally, basic material and industrials saw the largest rises in appetite while healthcare and technology had the greatest jumps in capacity.”