Global mergers total falls to lowest level in 7 years

Mergers and acquisition deals worldwide have fallen to their lowest levels for seven years, but private equity buyouts are propping up the market, research published today shows.

Figures from KPMG show that in 2002, so far 17,414 deals have been completed, worth $996bn (£626bn). This is a 47 per cent reduction in value compared to last year and a 24 per cent decline in the number of deals.

In the UK, there was a 25 per cent fall in the number of deals done to 2,580. The value of these deals fell 38 per cent to £102bn.

Meanwhile, private equity transactions have accounted for just under half of the total M&A value in 2002, according to research by Barclays Private Equity and Deloitte & Touche Corporate Finance.

Private equity deals now account for 6 per cent of total M&A activity worldwide by value, compared to 2 per cent in 2000.

Stephen Barrett, the international chairman of KPMG Corporate Finance, said 2002 has been the worst investment banks will have seen for more than a decade. "We have yet to see any tangible evidence of an arresting process, and we can only hope that we will soon be bumping along the bottom."

The Deloitte and Barclays research shows UK private equity deals were worth £14.3bn in 2002, a fall of more than a quarter from last year.

The decline in activity was largely caused by a fall in mega-deals – transactions worth more than£100m – with only 27 completed compared to 36 in 2002.

Tom Lamb, the managing director UK of Barclays Private Equity, said: "Owners of businesses are finally starting to get more realistic in their price expectations. Vendors are vending, lenders are lending and I predict that the private equity houses will soon be spending."

There were 12 delistings in the second half of the year, compared to six in the first half. Volumes dropped to 566 transactions, the lowest since 1994. The hotels, catering and leisure sector was the most active in terms of value in 2002, with the total of £3.6bn. The average deal value has now dropped to £25.3m, compared to £31m in 2001.