ZEW-ZEPHYR M&A Index - Slight decrease in worldwide M&A activities in the first quarter of 2007

Worldwide merger and acquisition (M&A) activities slightly dropped in the first quarter of 2007. Accordingly, the ZEW-ZEPHYR M&A Index is at 126 points in March 2007 compared to 142 points in December 2006 (see chart at the end of this press release), and is currently still significantly below its previous highs of January 2001 (158 points) and July 2005 (151 points) respectively. However, a considerable increase in worldwide M&A activities can be anticipated for the next months.

Favourable economic conditions and an almost euphoric disposition of stock markets provide good medium term conditions for a further stimulation of the M&A market. Large-scale transactions are likely to occur particularly in the financial services sector as well as in the pharmaceutical industry. While in the former sector ABN Amro and Barclays already announced to merge there are also rumours of a merger between the Italian bank Unicredit and the French institute Société Générale. The pharmaceutical industry could face restructuring from a supposed merger between Sanofi-Aventis and Bristol-Meyer Squibb.

The ZEW-ZEPHYR M&A Index, which the Centre for European Economic Research (ZEW) and Bureau van Dijk Electronic Publishing (BvDEP) calculate every month, tracks the development of merger and acquisition transactions concluded worldwide from the start of the year 2000 onwards. The Index is calculated on the basis of both the number and the volume of mergers and acquisitions concluded worldwide, as recorded in BvDEP's ZEPHYR Database. The index uses the monthly rates of change of both the number and volume of M&A transactions, combined and adjusted for volatility. As a result, the Index offers a much more precise picture of the level of M&A activity in the world than can be attained by observing transaction volumes alone. The reason for this is that a firm's value on the stock exchange has a strong influence on the transaction value, particularly as many acquisitions are paid for by means of an exchange of shares. The consequence of this is that the share price could have a disproportionately strong influence on estimations of the trends in M&A transactions. If, however, the total volume is spread over a larger number of transactions within the month, this increases the value of the M&A Index, although the aggregate transaction value remains unchanged.

Contact

Dr. Christoph Grimpe, E-Mail: grimpe@zew.de