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July 17, 2011

Global M&A market confidence falls

Global confidence in the M&A market has fallen in the past six months to June, a KPMG global report has found.

The report, M&A Predictor, found that while total deal values are rising globally the numbers of transactions are declining.

KPMG said despite the fragile appetite for deals currently, there is an encouraging downward trend in net debt/EBITDA ratios, projected to fall 26 percent by June 2012, which means as companies have lower debt levels they should have a greater capacity to borrow money to fund deals.

Asia-Pacific remains one of the most active M&A markets according to KPMG despite a price/earnings decrease in China and Hong Kong.

KPMG Hong Kong head of M&A Jeremy Fearnley said the decline in price/earnings levels reflect the “general uncertainty in the global financial markets as the West seeks to avoid national credit default, stabilise the banking sector and maintain its fragile economic recovery.”

At the same time, the impact of China’s cooling measures is tempering companies’ valuations in the domestic markets. On a positive note, however, the continued deleveraging of companies’ balance sheets is creating a significant war chest and we expect these to be put to use over the coming 12 months,” he explained.

KPMG also said that the healthcare sector is in the strongest position for deals due to low debt levels and there is a high activity expectation for the telecommunications sector in the next 12 months.

 

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