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ZEW-ZEPHYR M&A Index - M&A Activities in Germany Expected to Remain Stable

(PresseBox) (Mannheim, ) Until mid-2012, no dynamic development of mergers and acquisitions (M&A) is to be expected in Germany. M&A activities remain on a low but more stable level. These are the findings of a forecast by the Centre for European Economic Research (ZEW), Mannheim.

Based on the Zephyr database by Bureau van Dijk (BvD), ZEW regularly calculates the M&A Index for Germany (see end of press release) and forecasts its development for the next 12 months. The M&A Index for Germany, which had been falling repeatedly since mid-2009, still remains below its initial level of 100 points in 2000 but a stabilisation of the indicator development can now be noted. For a bit more than a year, the indicator has been varying between 40 and 60 points.

An economic slowdown is expected for Germany in the second half of 2011. Furthermore, the recent falls in the German stock market have a negative impact on the development of the M&A Index because it is generally assumed that falling shares indicate an unfavourable development of enterprises. Investors, however, usually seek to purchase promising companies. On the other hand many new rumours about upcoming market deals have been spread and the number of announced transactions has increased particularly during the first six months of 2011. These positive effects will have an impact on M&A activities towards the end of 2011. It can therefore be assumed that, despite a strong but only temporary decline, the M&A Index for Germany will again stand between 40 and 60 points during the first half of 2012. "Due to the economic slowdown in Germany, a strong rise in the M&A Index for Germany cannot be expected in the near future.

In addition to that, banks could again make lending more difficult, which could increase costs for M&A transactions," says Vigen Nikogosian, ZEW researcher responsible for the calculation of the forecast.

The ZEW-Zephyr M&A Index was developed specifically for Germany and tracks the development of mergers and acquisitions since 2000, based on the Zephyr database by Bureau van Dijk (BvD). The ZEW-Zephyr M&A Index for Germany is calculated using the number of M&A transactions in Germany, only factoring in mergers and acquisitions of German firms. The origin country of buyers or partner does not play a role in the calculation. This means that both German and foreign buyers but only target firms located in Germany are taken into account.

In particular, macroeconomic conditions like the economic development or the development of financial markets, determine the M&A activities.

Based on an empiric study, the forecast of the M&A activities in Germany is calculated by means of the OECD composite leading indicator (CLI) for Germany, the long-term level of interest rates, the development of DAX and the number of rumours of future mergers.

The press release attached contains a chart of the ZEW-Zephyr M&A Index.