Analysis from Deloitte, the business advisory firm, shows that companies can almost double their shareholder return by completing deals during an economic slump.  The analysis of over 100 of the largest completed acquisitions over a ten year period from 1996 - 2006 highlights a two-year return of 12.1% over peer group average for those UK businesses which announce deals negotiated in a downturn.  This compares with just 6.1% for those which announce deals in a more buoyant market.

Andrew Curwen, global head of transaction services at Deloitte commented: “If we look back in history, it’s clear that some very successful deals have been done in periods of economic stress.  For example, in the late 90s during the Asian Financial Crisis, those well capitalised buyers who invested in their M&A capability picked up some relative bargains. Clearly, access to finance and timing is critical and  smart companies are now taking another look at the market and positioning themselves to move quickly.  Opportunities to buy assets from stressed or distressed owners can, in the current environment, appear at a moments notice."

Leor Franks, director of practice development and author of the research said: “Whilst it’s logical that lower prices offer greater upside, our research shows that acquisitions in a downturn offer twice the differential return of those completed in a period of stronger growth. This may encourage an increase in deal activity as those organisations that are ready and able to buy increasingly take advantage of opportunities. In fact our recent CFO survey showed that for the first time since the beginning of the credit crunch, CFOs have a positive outlook for M&A activity levels.”

ends

Note to editors

About the research
The research analysed the largest 225 all UK completed acquisitions by listed companies announced over a ten year period from 1996-2006, of which 110 provided sufficient data for analysis.  Return calculated as average variance of acquirer‘s Total Shareholder Return over two years from date of announcement, over median of peer group. Downturn defined as a quarter of below average (2.9%) GDP growth.

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.

Deloitte & Touche LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu (‘DTT’), a Swiss Verein, whose member firms are legally separate and independent entities.  Please see www.deloitte.co.uk\about for a detailed description of the legal structure of DTT and its member firms.

The information contained in this press release is correct at the time of going to press.

For more information, please visit www.deloitte.co.uk