The final quarter of 2008 brought the largest decline in Global M&A activity since 2004, compounding the problems of an already slowing M&A market.

As a result of the lack of available credit, depressed equity markets and worldwide financial turmoil, fourth quarter M&A deals fell by 44% in 2008 year-on-year, according to Thomson Reuters.  This decline represented the lowest quarterly volume since Q3 2004.

On the whole, 2008 M&A deals are expected to slow to approximately 33% of 2007 activity, ending a five year stretch of Global M&A growth.

Global merger volume in 2008 totaled $2.89 trillion, the lowest annual merger volume since 2005, with China and Brazil as the only countries to buck the decline.   In the United States, 2008 M&A volume fell by 38% compared to 2007, while Europe and Asia Pacific fell by 29% and 12% respectively. 

The outlook for the first half of 2009 calls for slowing trends to continue.  However, the US Central Bank's monetary and fiscal reforms should begin to gain traction over the first half of 2009 and help to stabilize global markets. 

Those companies that have managed to hold on to cash reserves during the global economic slowdown will be able to fill strategic voids with great buying opportunities into 2009. 

Time is a healer

Many M&A deals were withdrawn in 2008, hoping for a more positive outlook and a more receptive M&A market in early 2009.  It will be interesting to watch M&A activity levels in early 2009, with the impact of forced acquisitions through bankruptcy, credit default and hostile takeovers.

Now that we have finished with gloom and doom, it is positive to note that the earnings multiples that companies have fetched in sale have remained buoyant.  In some instances, however, this may still lead to a lower sales price if the company has witnessed shrinking margins and reduced earnings.

Anecdotal evidence shows that there are still opportunities for certain companies to sell for a great price, in particular those which have a positive outlook and have been enjoying growing revenues and profits.  Early 2009 could be a better time to go to market as many buyers have been sitting on the sidelines. 

For the most part, deals are closing with less leverage than in recent times but there is still liquidity if the right opportunity presents itself.  Contrary to popular belief, plenty of cash remains available for acquisitions. Strategic and equity investors still have deep pockets and plentiful supplies of capital.  If you are looking to sell your company, you just need to turn the tables and create a competitive sale process to ensure a timely and successful sale.

Our team at ClearRidge suggests that you take some basic steps to restructure your company today to prepare for a future sale well in advance of discreetly marketing your company for sale. When the time comes, you will be in a better position to maximize your sale price.

Source: Thomson Reuters

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