ZEW-ZEPHYR-M&A-Index - Economic Slowdown Diminishes Desire for M&A Worldwide

Worldwide mergers and acquisitions (M&A) activities remain sluggish in the second quarter of 2008. The ZEW-ZEPHYR-M&A-Index finished at only 117 points in June 2008. In December 2007, the Index was standing at 142 points. At the moment, the Index is still above its launch-level of 100 points in January 2000. Nevertheless, in May 2008, it reached its lowest level in four years – 110 points – and it was obviously below its longtime mean of 125 points in June.

The ZEW-ZEPHYR-M&A-Index is still influenced by the worldwide credit crisis and the related economic slowdown on the M&A-market. Further downturn is expected in the next months. Although the current low valuation level of many companies creates favourable conditions for M&A-transactions, the uncertainty about the future economic developments and the turbulences on the global stock markets impedes the M&A activities and lowers the popularity of stocks as a basic acquisition currency.

The ZEW-ZEPHYR-M&A-Index, which is calculated by the Centre for European Economic Research (ZEW) and Bureau van Dijk Electronic Publishing (BvDEP) every month, tracks the development of mergers and acquisitions transactions concluded worldwide from the beginning 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 worldwide 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. However, if 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

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