Mergers and Acquisitions Down in First Quarter

The uncertainty caused by the debt crisis and weak global economy has affected mergers and acquisitions, whose volumes decreased by 24 percent in the first quarter of this year compared with the final quarter of 2011 and were down 26 percent year-on-year, a report showed on Monday.

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The Ernst & Young M&A Tracker showed that globally, deal values were down 13 percent from the last quarter of 2011. The relatively smaller fall in value compared to deal volume reflects the increase in average transaction value quarter-on-quarter, Ernst & Young said in a statement.

"The market uncertainty of late last year has clearly impacted transaction activity in the first quarter of 2012," Dave Murray, transaction advisory services markets leader at Ernst & Young, said in the statement.

"That said, the small upswing in average deal values could indicate an increase in confidence among buyers—who while still cautious about undertaking transactions, are more willing to push through larger deals,” Murray added.

The level of deals fully financed by cash fell to 55 percent in the first quarter.

“For the strongest businesses, the historically low cost of debt and improving equity markets have driven funding strategy away from utilizing the mountains of cash that many well rated companies are sitting on, towards external sources of finance," Murray said, adding: "This reflects an increasing confidence about access to capital markets for transactions."

The only region where both the number of announced transactions and their total value increased in the first quarter of this year from last year's fourth quarter was the Middle East and North Africa.

Analysts at Goldman Sachs wrote in a market report last week that a combination of high cash balances, improving confidence, low interest rates and slowing top-line growth should produce an uptick in mergers and acquisitions for the year.