ZEW-ZEPHYR M&A Index - Worldwide M&A Activities Stagnate on a High Level in the Second Quarter of 2007

Worldwide merger and acquisition (M&A) activities remained almost unchanged on a high level in the second quarter of 2007. The ZEW-ZEPHYR M&A Index is at 125 points in June and has slightly decreased compared to 134 points in March 2007.

Currently the index is indeed significantly above its initial level of 100 points in January 2000. But it cannot build on previous highs of January 2001 (156 points) and July 2005 (150 points) respectively. However, a considerable increase in worldwide M&A activities can be anticipated for the next months. Excellent economic conditions and a favourable stock market sentiment provide good medium term conditions for a further stimulation of M&A markets. This could again result in large-scale transactions as rumours about a merger between the consumer goods producers Colgate-Palmolive and Unilever or between the telecommunications firms Verizon and Vodafone indicate.

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

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