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UK takeovers down amid Eurozone fears

THE turmoil sparked by the eurozone debt crisis has caused a 14pc fall in the number of takeovers and mergers in the UK, a report revealed today.

The declining number of deals in the first quarter of 2012 compared to the previous three months was driven by fears over the future of the eurozone as Greece threatened default, Ernst & Young's M&A Tracker said.



The same trend was echoed on a global scale, with the number of deals down 24pc. However, in the UK, a 41pc rise in the average size of the deals to 264 million US dollars (£167 million) meant their total value rose 20pc, beating the global picture where average transaction values increased slightly.



Jon Hughes, transaction advisory services leader at Ernst & Young, said: "The market uncertainty of late last year has clearly impacted transaction activity in the first quarter of 2012.



"That said, the small upswing in average deal values could indicate an increase in confidence amongst buyers - who whilst still cautious about undertaking transactions, are more willing to push through larger deals."



The proportion of deals in the UK financed by cash rose to 91pc from 88pc previously, driven by an increase in the number of companies sitting on large surpluses. This was much higher than the 55pc of deals financed by cash on a global scale.



Mr Hughes added: "Globally, the historically low cost of debt and improving equity markets have driven funding towards external sources of finance.



"This reflects an increasing confidence about access to capital markets for transactions.



"In contrast, deals in the UK have been, on the whole, financed by well rated companies utilising their healthy cash piles to fund 100pc cash payment transactions."