Turmoil Puts Big Takeovers on Hold

Companies across the globe are putting multibillion-dollar deals on ice as the rout in equity markets makes it almost impossible to put a value on takeover targets, the Financial Times reported.

Several big transactions, including the $3 billion sale of Tarmac by Anglo American, have fallen through, with more expected to follow.

This has been the slowest start to the year for deals since 2002, with worldwide volume dropping 17 percent to $116 billion, according to data from Dealogic.

North America and Europe, which traditionally account for about 60 percent of global volume, are the worst performing regions so far this year.

Tony Burgess, global head of M&A at Deutsche Bank, said there were fewer deals as share prices declined.

Many companies had hoped to take advantage of the credit crunch, which has stopped private equity firms from acquiring companies with large amounts of debt. But the dramatic fall in share prices, coupled with the capital constraints on banks financing the deals, has changed sentiment almost overnight.

Mervyn Metcalf, managing director at Merrill Lynch, said that while falling equity prices potentially created cheaper buying opportunities, the ability to raise funding combined with shareholder perceptions of value in the event of an offer may restrict deals in the short term.

And confidence among chief executives of some of the world’s biggest companies has fallen for the first time in five years, according to PwC.

[KHS]

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