ZEW-ZEPHYR M&A-Index - M&A Market Likely to Bottom Out

Worldwide activities in mergers and acquisitions (M&A) stabilised at the end of the third quarter of 2009. In September, the indicator reached 105 points. Therefore, the index of the third quarter 2009 is slightly above the launch-level of 100 points in January 2000 but still well below the long-term average of 126 points. In August the ZEW-ZEPHYR M&A-Index had dropped to its all-time low of 92 points again which was already reached in May 2009. The ZEW-ZEPHYR M&A-Index is calculated on a monthly basis by the Centre for European Economic Research (ZEW) and Bureau van Dijk Electronic Publishing (BvDEP). It tracks the development of mergers and acquisitions transactions conducted worldwide.

"The development of the ZEW-ZEPHYR M&A-Index in the third quarter indicates that the M&A market is likely to bottom out," says Dr. Christoph Grimpe, Senior Researcher at the ZEW. According to Grimpe, the M&A market is going to benefit from the apparent improvement of the economic situation. Currently the M&A business already profits from in part significantly increased share prices, as high priced shares are an attractive means of funding acquisitions. However, a setback for the M&A market is that many banks are still reluctant in granting loans which are often needed to finance M&A transactions.

The ZEW-ZEPHYR M&A-Index is calculated by the Centre for European Economic Research (ZEW) and Bureau van Dijk Electronic Publishing (BvDEP) and tracks the development of mergers and acquisitions transactions conducted worldwide since 2009. The calculation is based on both the number and the volume of mergers and acquisitions concluded worldwide, as recorded in BvDEP's ZEPHYR Database. The index uses the monthly rates of change of both the volume and value of M&A transactions, combined and adjusted for volatility and inflation. As a result, the index offers a much more precise picture of the level of M&A activities in the world than can be attained by observing transaction values alone. The reason for this is that a firm's value on the stock exchange has a strong influence on the transaction value, particularly as many acquisitions are paid for by means of an exchange of shares. Consequently the share prices could have a disproportionately strong influence on estimating the trends in M&A transactions. If, however, the total value is spread over a larger volume of transactions within a month, the value of the M&A-Index increases although the aggregate transaction value remains unchanged.

For further information please contact

Dr. Christoph Grimpe, E-mail: grimpe@zew.de