ZEW-ZEPHYR M&A-Index: Downward Trend of Worldwide M&A Activities Continues in 2012 – Cautious Prospects for the Coming Year

Worldwide M&A activities were regressive again in 2012. The moving average of the ZEW-ZEPHYR M&A-Index, which reflects the mergers and acquisitions concluded worldwide, continued its downward trend and clearly lost ground compared to 2011. Altogether there were some 1,000 M&A transactions less in 2012 than during 2011, and the aggregated transaction volume fell by 74 billion euros compared to the previous year. For 2013, no significant upturn is expected at the moment. This is shown by the calculations made by the Centre for European Economic Research (ZEW) on the basis of the ZEPHYR database of Bureau van Dijk (BvD).

During the previous year, volatility in worldwide M&A activities was considerable, as the month-on-month movements of the ZEW-ZEPHYR M&A-Index clearly show. After a relatively weak start in January 2012 with only 112 points, the ZEW-ZEPHYR M&A-Index, which is calculated on a monthly basis by ZEW and BvD, reached its highest level this year in July with 124 points. The index did not remain very long at this peak value, however: within a few weeks, the index dropped significantly and reached 91 points in September, the lowest level since its introduction on a 100-points mark in 2000. Currently (as of November 2012) the ZEW-ZEPHYR M&A-Index shows 111 points, which is nearly the same level as at the beginning of 2012.

However, this cannot hide the fact that the decline of the M&A-Index’s moving twelve-month average continued in 2012. The number of transactions between January and November 2012 is lower by about 1,000 transactions (14 per cent) than the comparative value of the previous year. Moreover, the aggregated transaction volume dropped by 74 billion euros (8 per cent) within the same period.

Prospects for the coming year are rather cautious, too. Due to the on-going European debt crisis, many companies avoid the investment risks associated with mergers and acquisitions. Accordingly, few M&A activities can be expected during the coming months. This is also reflected by the number of rumours about mergers and acquisitions, which are regarded as a good indicator for the number of deals realised in the future: in the second half of 2012 the number is about 14 per cent lower than the previous year’s value. From today’s point of view, no sustainable stimulation of worldwide mergers and acquisitions can thus be expected in the coming months. "However, market participants from the M&A environment report that banks seem to open up again for financing deals. If this will support a trend reversal remains to be seen", says Mark Schwerzel, BvD’s International Director.

For further information please contact

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

ZEW-ZEPHYR M&A-Index

The ZEW-ZEPHYR M&A-Index is calculated on a monthly basis by the Centre for European Economic Research (ZEW) and Bureau van Dijk (BvD) and has been tracking the development of mergers and acquisitions worldwide since the beginning of 2000. The ZEW-ZEPHYR M&A-Index is based on the number and the volume of global mergers and acquisitions recorded in BvD’s ZEPHYR database. The index uses the monthly rates of change of both 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 worldwide M&A activities than a mere observation of the transaction volume. The reason for this is that a firm’s value on the stock exchange has a strong impact on the transaction value, particularly since many acquisitions are paid for by an exchange of shares. Consequently, stock prices could have a disproportionately strong influence on how the development of M&A transactions is assessed. If the volume is spread over a larger number of transactions within one month, however, the value of the M&A-Index increases even though the aggregate transaction value remains unchanged.