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

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

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.