One in four M&A talks ended in failure over the past 12 months

One in four M&A talks ended in failure in the last 12 months, as rising economic and political uncertainty increases caution over deal making, according to research by Moore Stephens.

The analysis of all UK fully listed and AIM deals, showed that 16 out of 66 deals failed at stage of formal talks in the year to Dec 31 2016, compared to 18 out of 81 the year before.

The percentage of stalled and ultimately failed deals could rise further if concerns over political interference or the volatility of the UK economy grows after the exercise of Article 50.

This year has already seen big M&A failures, as talks between Kraft and Unilever, which would have created one of the biggest M&A deals of all time, were called off and the merger between the London Stock Exchange and Deutsche Boerse has run into difficulties.

Other examples of failed bid talks in 2016 include the failed deal over the acquisition of Darty Plc by furniture retailer Conforama France in May, while recent failed talks between AGA Rangemaster Group Plc and Whirlpool Corporation in 2015, resulted in AGA being acquired by The Middleby Corporation.

Debbie Clarke, Head of M&A at Moore Stephens says: “Political and economic turbulence tends to make business more cautious about taking on the risks of an M&A deal, especially where a deal might require the bidder to add substantially to their level of debt.

“However, countered against the increased uncertainty of the economic and political environment is that businesses do far more rigorous pre-talks due diligence on their targets than they did before. That due diligence makes a last-minute change of mind less likely.

“That pre-offer due diligence includes sounding out the supply chain, customers and major shareholders of the target. More robust business modelling makes last minute jitters less likely.”