A tale of two studies: M&A plummets, but UK investment forecast to rise

As private equity investment activity continues at a snail’s pace, a majority of private equity professionals in the UK predict an increase in activity at some point in the next year.

Private equity professionals in the UK are confident that deal activity will pick up during the next 12 months, according to a survey released this morning.

The poll of 100 private equity executives carried out by accountancy firm Grant Thornton found that 57 percent of respondents were expecting an increase in private equity investment. Twenty percent expected a decrease in deal volume, while 23 percent predicted no change.

Optimism that investment activity will pick up at some stage in the next 12 months may not come as a surprise, given that a combination of scarce bank debt and poor visibility of earnings has meant that deal activity has hit a historic low in 2009.

Data released by Mergermarket today shows that UK M&A activity – both corporate and financial sponsor-backed – has nosedived. The total value of transactions in the first six months of the year was £31.5 billion (€36.4 billion; $50.6 billion), 71 percent lower than in the same period last year. More than £13 billion of this was made up by the government’s acquisition of stakes in major British banks. Figures released by the Centre for Management Buyout Research last week confirmed the first half of 2009 was the quietest period in terms of buyout activity since 1995, with only nine buyouts above the £50 million mark.