Monday, June 30, 2008

Cash is King as Dealmakers Predict M&A Upswing in Next 12 Months

The majority (58%) of European corporate and advisory executives expects levels of cash backed M&A to increase in Europe over the next 12 months, according to a new study conducted by mergermarket and commissioned by Merrill DataSite, the leading global provider of virtual data rooms (VDRs)¹. Nearly a quarter (23%) predicts it will remain the same while 19% believes there will be a decrease. 

The optimistic outlook for the M&A market follows an 11% decline in the number of announced and completed European M&A deals in the past 12 months to June 2008 compared to the previous year².  

Agreed acquisitions were judged to be the most popular type of M&A deal over the next 12 months, followed by private placements, leveraged buyouts, nil-premium mergers and hostile bids. Over two thirds (67%) of respondents believed that the Industrials sector would generate the most M&A activity, followed by the IT services (52%), oil and gas (47%) and financial services sectors (45%).

Despite the optimism regarding greater deal flow, respondents estimated that a fifth (21%) of deals are failing due to issues arising during due diligence. Unsurprisingly, nearly three quarters (73%) believe that the credit crunch has meant due diligence has taken longer to complete with more analysis being undertaken. Over half (53%) said there has been a decline in the number of interested parties and a third (34%) believes that speed has been increasingly important in conducting M&A as market conditions have changed so rapidly.

VDRs are an online version of the traditional paper room and are increasingly becoming the de facto standard for conducting due diligence, thanks to their advantages which include cost-effectiveness, speed, ease of use, security and auditability. 

Merlin Piscitelli, Director at Merrill DataSite said: “VDRs are used on around 60% of due diligence transactions in the US and they are becoming increasingly popular in the UK as well as the rest of Europe. Indeed, our research shows that 87% would consider using a VDR on M&A sell-side due diligence and almost half believe that using a VDR increases the likelihood of a successful deal. 

“At the same time, with an improvement in the market anticipated over the next year and the continued resilience of the mid-market, we expect that the ability to keep costs low and speed up transaction times will only attract greater uptake of VDRs.”

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¹Research conducted in June 2008 by mergermarket of executives in the UK, France, Germany, Sweden and the Netherlands from the financial, legal, corporate and private equity spheres.
² mergermarket data


Patrick Evans / Alex Bell - Citigate Dewe Rogerson
Tel: +44 20 7282 2913

Merlin Piscitelli - Director, Merrill Corporation
Tel: +44 917 761438

About Merrill DataSite™

Merrill DataSite is the leading global provider of turnkey virtual data room (VDR) solutions. It combines the industry’s leading technology with highly secure technical and operational environments, and a professional staff dedicated to customer success.

Merrill DataSite has hosted VDRs for thousands of clients and millions of visitors, representing transactions totalling billions of pounds in asset value. Its VDRs handle any transaction requiring due diligence, including M&A deals, IPOs or secondary offerings, REITs, loans or financing facilities, and bankruptcies.

Merrill DataSite is part of Merrill Corporation, which was founded in 1968 and is headquartered in St. Paul, Minnesota. Its international operations are headquartered in London, with other European offices in Frankfurt and Paris.

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