Private Equity Activities on the M&A Market Remarkably Stable

As a result of the global economic and financial crisis, mergers and acquisitions (M&A) of firms have declined considerably. Private equity businesses in particular, as highly important investors in M&A deals, have been severely affected. Nevertheless, their share in global M&A activities has remained on a surprisingly constant level since the onset of the financial crisis, though deal volumes in general have decreased dramatically. This is found in a recent survey of global M&A activities by the Centre of European Economic Research (ZEW), Mannheim, Germany, and Bureau van Dijk Electronic Publishing (BvDEP).

The analysis of the ZEPHYR database of BvDEP which contains diverse information of worldwide M&A activities reveals that in the first half of 2009, the share of M&A transactions with Private Equity funding made up 57 percent of the deal value of all global M&A transactions. Thus, Private Equity remains one of the central factors of worldwide M&A activities.

It should be taken into account, however, that in recent months the scale of M&A activities in general has decreased considerably and so has the absolute contribution of Private Equity businesses. In the first half of 2009, global M&A transactions with Private Equity investments amounted to about 530 billion euro – in contrast to 820 billion euro in the second half of 2008. In the same period, the value of all globally conducted transactions dropped from approximately 1.5 trillion euro to merely 930 billion euro. Since the second half of 2007, private equity as a share of the whole invested capital even declined by about 50 percent. In addition, the number of deals decreased, but only by about 20 percent.

"This development shows that, although private equity businesses have been hit hard by the crisis, they will continue to play an important role in the funding of M&A deals," says Dr. Christoph Grimpe, Senior Researcher at the ZEW. “Banks are still very reluctant to grant loans. As soon as there are reliable signs of an economic recovery, the Private Equity business should also pick up again," Mark Schwerzel, International Director BvDEP, points out optimistically.

For further information please contact

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