Firms urged to splurge as purge spawns mergers

Sale of the century: almost one in ten UK acquisitions involves a company bought from administration

Almost one in ten mergers and acquisitions in the UK involves a distressed company being hauled out of the mire, research has revealed.

Of the 1,491 company buy-outs during the first half of 2010, 141 involved a firm bought out of administration or another form of insolvency. This equates to a 9.4 per cent of all deals, a significantly higher proportion than the roughly four per cent of acquisitions that involved an insolvent business in 2008.

The research, conducted by Experian Corpfin on behalf of insolvency trade body R3, also reveals the total value of distressed acquisitions in the first half of 2010 was £518.5m. Steven Law, R3 president, claimed the UK could expect more troubled firms to come up for sale over the course of the rest of the year.

“Insolvent businesses continue to feature in a significant proportion of deals within the UK," he said. "The recession may have officially ended, but distressed businesses and assets are continuing to come onto the market."

Law added that acquisitive players should reach into their pocket while bargains remain plentiful.

“For buyers with access to funding, there is the opportunity to extend their portfolio while values remain subdued," he said. "For the businesses themselves, an acquisition represents a fresh start and a chance to secure the jobs of the workforce.”