Credit crunch leaves M&A activity at a 40-year low

Merger and acquisition activity fell to its lowest level in 40 years as a result of the recession and a shortage of credit, official figures revealed yesterday.

The Office for National Statistics (ONS) said that expenditure on acquisitions in the UK by British companies dropped from £8.2bn in the first quarter of this year to £0.7bn between April and June – the lowest quarterly value recorded since 1992.

The number of domestic deals – just 41 – is the lowest total since the ONS began keeping records in 1969. The most significant domestic transaction in the second quarter of this year was the acquisition by Peter Hambro Mining of Aricom, the iron ore mining company.

Acquisitions of British companies by foreign concerns collapsed almost completely in the second quarter of this year, again as a result of the worldwide credit crunch.

The ONS reported that expenditure on acquisitions in the UK by foreign companies fell from £12.3bn, in the period from January to March, to just £400m over April to June – the lowest quarterly figure reported since 1987. The number of deals fell to 14, also the lowest since 1987.

Expenditure on acquisitions abroad by UK companies fell from £3.7bn in the first quarter to £2.4bn in quarter two, a five-year low. Important deals included the acquisition by Vodafone Group of a controlling stake in Vodacom of South Africa for £1.6bn, and the disposal by Cadbury of Schweppes Australia to Asahi Breweries for £600m.