ZEW-ZEPHYR M&A-Index - Further Decline in M&A Activities in the 2nd Quarter of 2009

Worldwide activities in mergers and acquisitions have continued to decrease considerably in the second quarter of 2009. In May, the ZEW-ZEPHYR M&A-Index reached an all-time low of 92 points. Thus, the index was ranked even below its launch-level of 100 points in January 2000. In June, the ZEW-ZEPHYR M&A-Index again reached the mark of 100 points, which is still considerably below its long term average of 126 points. The fact, that the index had reached a level of 147 points by the end of 2008 (see figure at the end of the press release) shows how strongly the financial and economic crisis affected M&A activities worldwide.

The ZEW-ZEPHYR M&A-Index, which is calculated monthly by the Center of European Economic Research (ZEW) and by Bureau van Dijk Electronic Publishing (BvDEP), tracks the development of mergers and acquisitions transactions concluded worldwide from the start of the year 2000 onwards. "The index' current level shows that there are only few transactions in the planning and implementation stage", says Dr. Christoph Grimpe, Senior Researcher at the ZEW. However, further positive news, for example regarding industrial production or economic growth worldwide, could rapidly revive the M&A business. "The current situation provides many opportunities for takeovers because of low firm valuations," says Mark Schwerzel, International Director BvDEP. Therefore, no further decline but a stabilisation of the index at a relatively low level is expected for the next few months.

The ZEW-ZEPHYR M&A-Index, which the ZEW Centre for European Economic Research and Bureau van Dijk Electronic Publishing (BvDEP) calculate every month, tracks the development of mergers and acquisitions transactions concluded world-wide 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 and inflation. 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