Canny business buyers contribute to rise in distressed acquisitions

February 1st, 2010 by Chris St Cartmail

Canny bargain-hunters seizing on the opportunity to buy a business while values are low are one of the drivers for acquisitions of insolvent firms in the UK more than doubling over the past year.

M&A analysts at insolvency trade body R3 also point to a slew of pre-pack administrations to account for the fact that one in every eight mergers and acquisitions throughout 2009 involved distressed businesses. The previous year there were 159 distressed acquisitions, accounting for one in 27 completed deals.

Research carried out by Experian Corpfin on behalf of R3 highlights that from October to December 2009 alone, 67 out of the 630 deals completed in the UK – one in nine of all deals – involved companies acquired out of administration or other formal insolvency procedures.

Peter Sargent, president of R3, commented that acquisitions of insolvent businesses have not only risen significantly but "remain high".

"While pre-pack administrations may account for some of these deals, others will be acquisitions by canny buyers taking the opportunity to pick up bargains while values are low,"' he continued. "Either way, these statistics represent businesses being given a second chance of survival."