The BDO PCPI Index for the second quarter has revealed that the number of mergers and acquisitions has risen

The BDO PCPI Index for the second quarter has revealed that the number of mergers and acquisitions has risen since the previous quarter, with total transactions increasing from 496 to 543. Indeed, so busy has the M&A market been this August that bankers have been called back to work from holiday - the first time this has happened since the credit crunch stalled activity three years ago. An explosion of energy deals has seen the global M&A weekly activity volume rise to $89.8 billion, the highest since November last year and the busiest August week since 2006.

Whilst this growth is in line with expectations voiced at the end of the first three months of this year, events that took place during those first months are continuing to impact on M&A activity on all levels, in all sectors, say economists, with the general election, emergency budget, Greek bailout and the uncertainty over the implementation of austerity measures by the UK Government having the most effect.

However, despite these ongoing challenges, the International Monetary Fund feels that the UK economy will continue to grow. These positive predictions come as a result of an increase in stability for the business community and, in line with that, greater confidence amongst business owners to start considering growing their companies. This increased confidence can be attributed to the decisive actions outlined in the Budget to tackle the country's deficit and their pledge to provide greater clarity over corporate tax policy.

While the uncertainty surrounding changes to CGT prior to the Budget announcement had stalled M&A transactions, now that people are aware of the changes - which were less drastic than some had feared - business buying and selling has picked up once more. And, because the changes were implemented straight away, there was no chance for an M&A bubble to form as owners rushed to buy and sell before the changes took place, thus providing a more stable environment, enabling owners to take a long-term view. The last time an M&A boom was recorded was in the first quarter of 2008, when volumes peaked at 1,159.

Another boost for the M&A sector has come about due to the rising numbers of international investors looking to snap up UK businesses. These investors, drawn by the relative weakness of the pound alongside the Government's strong stance to tackle the financial woes, are finding UK companies an increasingly attractive proposition. All of this allows companies and investors to look ahead with greater certainty and plan acquisitions to drive the next phase of growth.

Christopher Clark, M&A Partner at BDO said, "With the general election out of the way, and an emergency budget that was broadly supported by the business community, the outlook for companies appears a little more certain than during Q1 2010."

"Despite a fragile recovery and cuts in public spending, leading forecasters are suggesting that growth will continue allowing businesses to be more certain in their own future and providing confidence to commence acquisition plans."

"These conditions, together with another quarter of stabilised pricing and pent up demand from both private equity and trade to acquire, should improve the outlook for transactions as business leaders look to plan the next phase of growth," he added.

But, although the rate of M&A transactions has risen this year, as a typical deal is taking up to six months to complete, economists are predicting that the full impact of the events mentioned earlier will not be truly reflected until the end of this year and into the next, when they will be revealed in completions happening at that time.

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