Credit crunch 'impacts upon company mergers'

28/01/2008

Although private equity-led mergers and acquisitions (M&A) decreased during the financial months of 2007 such transactions will still prevail, it has been suggested.

Research released by KMPG indicated that the number of deals dropped to 25 during the final quarter of last year, compared to the 51 recorded during the same three-month period in 2006, reports the Scotsman.

It was suggested that banks are increasingly unwilling to approve loans to complete private equity M&A deals due to the credit crunch, with Michael McDonagh, corporate finance partner in KPMG's Private Equity Group, suggesting that transactions for the course of 2008 are possibly set to hit a record low.

However, he claimed: "There is still demand for high-quality assets in the private equity market and a great deal of equity chasing the right deals, meaning that in those cases pricing remains at pre-credit crunch levels."

Mr McDonagh added that, given the right mixture of deal structuring, management and market positions, "good quality transactions will continue to be closed" over the course of 2008.

Earlier this month, Alison Small, director at City Invoice Finance, told the Manchester Evening News that more small firms are looking towards invoice financing as a means of solving difficulties with funding.