ZEW-ZEPHYR Index for Germany - Mergers and Acquisitions Continue to Stagnate in 2013

A recovery of the German M&A-market is still not in sight. The ZEW-ZEPHYR Index for Germany has been manoeuvring at the 60-points mark since the beginning of 2011. Until mid-2013, M&A activities will stagnate at this level. This is the result of a forecast conducted by the Centre for European Economic Research (ZEW) in Mannheim. The current level of the M&A-Index Germany is considerably below its initial value of 100 points in 2000.

On the basis of the Zephyr database of Bureau van Dijk (BvD), ZEW calculates the M&A Index for Germany (see also at the end of this press release) on a regular basis and forecasts its further development until July 2013. Currently, the ZEW-ZEPHYR Index Germany is at a level of approx. 60 points. In January 2012, the index had reached 87 points, which was the highest monthly level since March 2010.  This outlier, however, did not endure. The index’ moving twelve month-average has been hovering unchanged around the 60 points-mark since February 2011. Hence, the bottoming-out process of M&A activities in Germany, which has started at the beginning of 2011, continues.

The forecast for the next months is also sobering. The current forecast assumes a further sideward movement in the area of the 60 points-mark. Next year’s indicator figures will more likely stay below this mark than above. One reason for the expected weak development of the indicator is the OECD Composite Leading Indicator (CLI), which is factored into the calculation. The June 2012 CLI showed the lowest value for Germany since October 2009. Furthermore, rumours regarding future M&A transactions, which have proven to be a good indicator for transactions realised in the future, have not noticeably intensified during the first half of 2012. A positive trend reversal of the M&A indicator is hence not likely until mid-2013.

One reason for the companies’ hesitation regarding mergers and acquisitions is the global economic insecurity due to the still unsolved debt crisis. Moreover, as a consequence of higher capital requirements, banks still pursue a cautious policy when it comes to financing transactions, thereby slowing a stimulation of the M&A market. Apparently, even low long-term interest rates in Germany, which provide a profitable framework for mergers and acquisitions, have no positive impact.

"Even M&A practitioners are not expecting a turning point for M&A activities coming up soon," says Mark Schwerzel, BvD’s International Director. "M&A clients as well as investment clients assess the development of M&A activities in other countries more optimistic. Particularly in Russia, increasing M&A activities are expected in 2013.”

For further information please contact

Florian Smuda, Phone +49 621/1235-233, E-mail smuda@zew.de

The ZEW-ZEPHYR M&A-Index

The ZEW-ZEPHYR M&A-Index was developed specifically for Germany and has been tracking the development of mergers and acquisitions since 2000, based on the Zephyr database by Bureau van Dijk (BvD). The ZEW ZEPHYR M&A Index for Germany is calculated using the number of M&A transactions in Germany, only factoring in mergers and acquisitions of German firms. The origin country of buyers or partners does not play a role in the calculation. This means that both German and foreign buyers, but only target firms located in Germany are taken into account.

In particular, macroeconomic conditions like the economic development or the development of financial markets determine M&A activities. Based on an empirical study, the forecast of M&A activities in Germany is calculated by means of the OECD Composite Leading Indicator (CLI) for Germany, the long-term level of interest rates, the development of DAX and the number of rumours regarding future mergers.