North-east dealmakers were said yesterday to be cautiously optimistic about prospects of increased merger and acquisition (M&A) activity over the next 12 months.
This emerged in a new survey of dealmakers by professional service firm KPMG.
A survey at an Aberdeen event found two-thirds believed it very likely they would be involved in M&A activity in the forthcoming year.
Nearly 40% believed, however, that a barrier to any future M&A transactions in the region would continue to be a lack of funding.
Main sources of any available funding during the next 12 months were expected to be private equity (38%) and banks (30%).
Marianne Lipp, director of transaction services at KPMG in Aberdeen, said: “Our research shows that, while concerns over sources of funding remain a worry, there is optimism among the region’s M&A community that business can and will be done in 2012.
“Confidence is an important factor in establishing a healthy dealmaking environment, so it is heartening to see some positive sentiment – especially given the continued economic uncertainty.
“As shortage of funding has been identified as a potential obstacle to deal activity, it is important for businesses to make themselves an attractive proposition for potential lenders. As lending becomes more aligned with business needs, companies entering refinancing discussions with their banks will likely become more dependent on the private-equity market or an IPO (initial public offering) route due to the banks’ cautious approach to risk, although IPOs in the current market are difficult and will be very conservatively priced.
“Financial providers require more in-depth diligence than in the past and will delve deeper into company prospects. Businesses need to display strong track records, a good business pipeline and clear objectives . . . to secure funding in the current marketplace.”
Traditionally a gap in the expectations of buyers and sellers has proven to be a barrier to deal activity, but the KPMG survey revealed north-east dealmakers were starting to see a convergence of those expectations.
Just under one in three dealmaking professionals was already seeing evidence of expectations coming together to a degree allowing deals to be done, while a further 48% believed the trend of convergence would continue during the next 12 months.