Distressed business acquisitions continue to fall

The number of businesses being bought out of distress in the UK in the first half of 2011 fell significantly, according to research from business information company, Experian CorpFin.

The statistics showed that just one in 19 of all the mergers carried out during the first six months of 2011 involved businesses in distress. This contrasted with one in nine during the peak of recent mergers and acquisition activity in 2009.

The research, which was carried out on commission from insolvency body, R3, showed that since 2009 the market of distressed deals has shown a steady decline.

Of 1,430 acquisitions carried out in the first half of 2011, just 76 involved businesses that were bought out of insolvency or administration. The total figure for the whole of 2010 was 249 distressed businesses in 3,139 acquisitions - working out as one in 13.

R3's Frances Coulson said, however, that the acquisition of distressed businesses remained a "key part of the deals landscape".

"Investors have been taking the opportunity to acquire businesses and assets while values are low and we have seen the emergence of specialist turnaround investors," she said. "However, in recent months there have been fewer bargains and many investors are struggling to acquire credit to make a purchase. For those investors who have the money supply they should remain alert as we can expect to see a continued supply of decent investment opportunities in the run-up to recovery, despite the number of insolvent deals recently falling."

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