Distressed deals still a feature of M&A market

Proportion of UK deals involving firms acquired out of administration still running at six per cent, new data suggests

The number of distressed M&A deals is still running at an historically high level with one in 13 UK firms acquired in the second half of 2010 insolvent, new figures have revealed.

According to research by Experian Corpfin on behalf of insolvency trade body R3, 100 deals in the six months to the end of December 2010 involved companies acquired out of administration.

With just one in 26 deals involving an insolvent business two years back, R3 said the rise in distressed acquisitions reflected the economy's trajectory.

It pointed out that more distressed deals (137) were completed in the first half of 2010 and that the proportion was as high as one in nine in 2009.

Steven Law, president of R3, said: "Insolvent deals have been running at high levels since mid-2008, when the economic problems began to set in. The numbers peaked between mid-2009 and the middle of last year, and have since fallen back to the levels of early 2009.

"Buyers who have had the money have been taking the opportunity to pick up businesses and assets during the downturn while values remain low. The fall in distressed deals in the past six months may reflect the fact there have been fewer insolvencies, and therefore fewer distressed businesses coming on the market."