The M&A marketplace was quieter than expected in Q2 2010,
despite signs of improving liquidity and some particularly strong
deal-making activity in the Midlands during the first quarter,
according to corporate finance experts at PricewaterhouseCoopers
LLP (PwC) in the Midlands.
The latest Debt Market Update by PwC reveals that while the
number of corporate deals nationally fell by 40% to just 21 during
the second quarter, the average value was £453m - almost
double that achieved in the previous quarter.
According to corporate finance experts at PwC, the lower than
expected volume of deals is due to continued uncertainty among
borrowers, lenders and investors, influenced by the continuing
eurozone debt crisis and renewed economic doubts.
Despite the air of caution, banks are demonstrating that they
are more willing to lend than they were this time last year and
lender confidence continues to move in a positive direction.
Matt Waddell, head of corporate finance at
PricewaterhouseCoopers LLP in the Midlands, said:
"Demand for new debt was weaker than expected during the second
quarter, due to the re-emergence of caution in the marketplace, and
this was disappointing after the comparative buoyancy of the first
three months here in the Midlands.
"However, lender confidence continues to improve and this
suggests that while the need for caution remains, a more sustained
upturn in M&A activity may not be too far away and we could
start to see signs of this in the final quarter of the year."
The Midlands saw some strong mid tier deal-making during Q1
2010, with Halfords plc completing its £73.2m acquisition of
private equity-backed Nationwide Autocentres and the Deb Group's
sale to Charterhouse Capital Partners for £325m.
According to Matt Waddell, the deal pipeline in the region has
remained strong through the summer. He said:
"The summer is always a quieter time for deal-making. However,
pipeline activity in the region suggests that more is on the way
and as long as concerns surrounding the continuing economic
uncertainty do not trigger a crisis of confidence among lenders and
borrowers, normal levels of activity should resume in 2011."
The Debt Market Update also considers the debt restructuring
market and finds that payment defaults and new formal restructuring
discussions are substantially lower than a year ago, with only five
companies incurring a payment default entering into formal
negotiations in Q2 2010, compared to 30 in the same period last
year. This could indicate that the worst of the restructuring cycle
is over. However, with a large proportion of loan agreements due to
expire in 2010-2014, the so-called 'maturity wall' is ensuring debt
maturity is a continued area of focus for companies.
Matt Waddell, head of corporate finance at
PricewaterhouseCoopers in the Midlands, concluded:
"Refinancings remain a feature of the Midlands marketplace but
these are less likely to be stress-driven. However, with the
'maturity wall' fast approaching, we are still advising businesses
that need to refinance to plan at least 18 months ahead."