UPFRONT SARS slows deals

An already battered M&A (mergers and acquisitions) market took further pasting in the first half of this year with global deals down by 33 percent and New Zealand activity nearly halved.

Worldwide, the number of deals fell from nearly 10,943 in the first half of 2002 to 7324 in the same period this year, according to KPMG Corporate Finance’s regular analysis based on data supplied by Dialogic.

The number of New Zealand companies targeted in deals dropped from 44 to 24, according to the local head of KPMG Corporate Finance, Russell Florence. The value of such deals fell by 75 percent to US$258 million.

The number of New Zealand companies bidding on overseas targets in the first half of 2003 also dropped – six compared with 15 during the same time last year. While the value of these deals increased, this was mainly due to Meridian Energy’s US$350.5 million acquisition of Australia-based Southern Hydro.

Offshore, the Asia Pacific region was worst affected by the slowdown with 49 percent decline in activity. There’s also been global drop in failed deals – suggesting greater caution toward early announcements.

Florence says the outbreak of SARS and the war in Iraq have compounded the effects of general economic slowdown but there are already signs of recovery. KPMG is speculating more “pent-up deal flow” yet to come and notes signs of increasing stability returning to the global market.

However, any increase in activity won’t show up until the end of this or early next year due to the length of time needed to complete deals.

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