LONDON (AFX) - European merger and acquisition activity has seen a weak start to the year, with the value of deals in the first quarter of 2006 showing a significant decrease compared to the two previous quarters, according to Zephyr, a leading electronic publisher of business information.
European companies saw acquisitions with an overall value of 203 bln eur during the period from January to March 2006. This represents a decline of 19 pct compared to the fourth quarter of 2005 when there were 254 bln eur of deals, and of 31 pct compared to the third quarter 2005 when M&A activity accounted for 296 bln stg worth of deals.
The decrease in overall deal value during the first quarter is also reflected by a decline in the number of deals which have fallen from 6,513 in the fourth quarter of 2005 to 5,860 in the first three months of 2006.
Despite the overall fall in M&A activity in Europe, there were some major deals completed during the period, including the 25.6 bln eur acquisition of O2 by Telefonica SA.
Lisa Wright, commercial Director of Zephyr, said the fall-off in M&A activity was a 'potentially worrying' scenario for the sector.
'The data shows that, in real terms, there has been virtually no growth in European M&A in the past twelve months. While there have been several peaks and troughs during that period, the overall value of European M&A is back at the same 20 bln eur level it was at in the fourth quarter of 2004,' she said. 'What is more surprising is that even a deal the size of Telefonica/O2 has done little to buoy up the European M&A market this year so far,' she added.
In Europe, M&A activity during the first quarter of 2006 has been strongly driven by UK deals with acquisitions of UK companies accounting for 76 bln eur of the 203 bln eur of total acquisitions during the period.
The most significant of these was the Telefonica's acquisition of O2, although several other multi-billion UK deals also completed during the period, including the 5.6 bln eur acquisition by Compagnie de Saint-Gobain of BPB and the 4.8 bln eur acquisition of Hilton International Hotels (UK) by Hilton Hotels Corporation.
Acquisition targets in France and Russia were also highly sought after, accounting for 35 bln and 20 bln eur respectively of all European acquisitions.
In terms of sectors, the communications sector accounted for the highest proportion of M&A activity during the first quarter with the Telefonica/O2 deal once again a key driver.
This was followed by the banking, insurance and financial sector, and the business services sector. newsdesk@afxnews.com ml/bam COPYRIGHT Copyright AFX News Limited 2005. All rights reserved. The copying, republication or redistribution of AFX News Content, including by framing or similar means, is expressly prohibited without the prior written consent of AFX News. AFX News and AFX Financial News Logo are registered trademarks of AFX News Limited