ZEW-ZEPHYR-M&A-Index: Worldwide M&A Activities Decline in 2007 - Sideways Movement Expected for 2008

Worldwide mergers and acquisitions (M&A) activities have decreased in the year 2007. The ZEW-ZEPHYR-M&A-Index finished at 131 points in December 2007. In December 2006 the Index had been at 149 points. This is equivalent to a drop by 12 percent.

In sum, 8,059 mergers and acquisitions of majority stakes with a total deal value of 1.7 trillion Euro were carried out in 2007, of those 1,971 transactions with a total deal value of 434 billion Euro in the fourth quarter 2007. Despite this decline, the Index currently stands significantly above its starting level of 100 points in January 2000 and the longtime mean of 125 points, the distance between the December 2007 level and the highest levels so far, in January 2001 (156 points), and July and December 2005 (each at 150 points), has increased. For the coming months, the Index is expected to move sideways. On the one hand, the earnings situation of many firms, particularly in Europe, continues to be excellent, which allows for a recovery of the M&A market. On the other hand, the turbulences at the global stock markets might impair M&A activities as shares become increasingly unattractive as a currency for acquisitions.

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 mergers and acquisitions transactions concluded worldwide from the start of the year 2000 onwards. The ZEW-ZEPHYR-M&A-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 volume and value 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 values 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 value is spread over a larger volume of transactions within the month, this increases the value of the M&A-Index, although the aggregate transaction value remains unchanged.

For further information please contact

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