Contact: Ali Agmen-Smith
Deloitte
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The acquisition of Elite Homes by Bovis Homes shows that the pattern of consolidation between major housebuilders continues despite the recent market turmoil.
According to Deloitte, the sustained M&A activity in the year to 31 July within the sector was driven principally by stable market conditions, new housing orders and a continued momentum within the leveraged finance market. The Bovis-Elite deal is instead based on market positioning and to allow for regional expansion plans.
Deloitte’s research found that up to mid summer 2007, when the credit crunch affected the global financial markets, 70% of transactions since June 2006 were executed as a mean of increasing market share and consolidating operations. The UK housebuilding sector was dominated by large-scale transactions with four deals involving considerations over £500 million.
Predictions for the future
Looking ahead, Deloitte expects the consumer driven construction sectors to slow as well as an increased caution among real estate investors.
However, there are still a number of sector related factors that could continue to attract investors to the market, such as the predicted housing shortages and recent announcements by the Chancellor.
Of particular note is the change to the Capital Gains Tax treatment of shares that will come into effect in April 08.
Commenting, Nigel Shilton, construction industry advisory partner at Deloitte, said: “The new regime will effectively increase tax payable on profits from disposal of shares to 18% (currently such disposals may qualify for business taper at 10%). The result of this is likely to be a significant short term increase in M&A disposal activity, especially in the housebuilding and construction sector, as shareholders seek to complete transactions before April 08 thereby avoiding paying the additional tax. This change may be the catalyst for privately owned or family-owned businesses to sell their business.”
Ends
About Deloitte
In this press release references to Deloitte are references to Deloitte & Touche LLP which is among the country’s leading professional services firms, providing audit, tax, consulting and corporate finance services. Deloitte & Touche LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu (‘DTT’), a Swiss Verein whose member firms are separate and independent legal entities. Neither DTT nor any of its member firms has any liability for each other’s omissions. Services are provided by member firms or their subsidiaries and not by DTT. Deloitte & Touche LLP is authorised and regulated by the Financial Services Authority. The information contained in this press release is correct at the time of going to press.
