Valuation gap hits mergers, survey shows

A valuation gap between buyers and sellers is hampering merger and acquisitions activity, with firms completing just one in eight of the transactions considered over the past two years.

More than half (55 per cent) of companies that sought to carry out a deal in the past year have failed to complete it, the annual M&A survey by the accountant BDO also found.

Roger Buckley, a partner at BDO, said that with many companies sitting on cash, there was less pressure to make divestments. "A 'valuation gap' exists between buyers, who are targeting acquisitions for growth purposes and sellers, who are in no rush," he said.

But more than 75 per cent of companies remain committed to acquisitions to drive their growth strategy, the survey suggests. This is strongest among listed firms and those backed by private equity.

Thirty-seven per cent of the 121 firms surveyed said they expected to make divestments as the market recovered, with most of them set to do this in the next two years.

Among those considering selling some assets or the entire company, nearly 60 per cent expected to see valuations remaining unchanged over the next 12 months.