DESPITE A noticeable decline in global mergers and acquisitions activity over the last quarter, total activity for 2007 still exceeds that for the whole of 2006, according to newly released Thomson Financial tables.
As reported in Lawyers Weekly last week, Thomson’s Australian tables state that Freehills ranked number one in M&A deals, taking 54.3 per cent of the market share in the first three-quarters of the year.
But globally, firms are not necessarily celebrating as even in the top ranks they have noticed a slump in M&A activity.
Figures from the global tables reveal a 66 per cent slump in the international M&A market which, due to the frenetic pace of worldwide M&As, had carried into the first few weeks of the third quarter. A Thomson Financial review of the tables said this was “fuelled by financial sponsor activity and attractive financing conditions”.
It also suggested an initial enthusiasm quickly evaporated in the midst of a “declining credit environment” and “investor uncertainty”.
Michael Walter, a London-based Herbert Smith corporate division partner, told Lawyers Weekly that broadly speaking, these figures provide a realistic impression of the international M&A market.
Walter confirmed that Herbert Smith had noticed a slump in M&A work and, “had a much quieter August and September as compared with the first seven months of the year”.
He attributed this largely to the “US subprime mortgage market problems and the accompanying turbulence in international financial markets”.
According to Walter, frictions in the market were further exposed by the high-profile Northern Rock litigation in the UK. The well-publicised problems of this mortgage lender have lead to “exacerbated market instability,” he said.
Despite the Thomson tables narrating a dire outlook, Walter remained positive the market would improve, but qualified this prediction with caution. “We are confident it will, and the green shoots of recovery are already visible, but it would be a very brave man who predicted what market conditions would be like in six months’ time,” he said.
Regardless of the recorded slump, the report reveals that “during the first nine months of 2007 worldwide M&A activity increased 50 per cent over the same period last year to reach US$3.6 trillion, already eclipsing the full-year 2006 totals”.
According to the report, European activity contributed to 40 per cent of worldwide volume while activity in the US accounted for 38 per cent of all announced, a change from to 41 per cent during the first nine months of 2006.
Walter said that Herbert Smith is not troubled by speculative reports of worsening market conditions. “Given the strength of our litigation/arbitration and restructuring practices we believe we are well-placed to grow our business whatever happens in world markets”.