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Takeover activity drops off

The total value of mergers and acquisitions in the UK property sector slumped to £431 million during the first half of the year, with activity driven down by economic uncertainty and problems obtaining finance.

The construction industry in particular experienced a low level of activity, a new report by business advisory and accountancy firm PKF found, as increasing caution slowed decisions on takeovers and buyouts.

But PKF corporate finance partner Malcolm Cook said he expected activity in construction’s merger and acquisition (M&A) market to pick up before the end of the year, driven by more “predatory or opportunistic” pursuits.

The second-half figures should already be boosted by last week’s sale of Taylor Woodrow Construction to the French infrastructure group Vinci for £74 million.

According to the firm’s Deal Drivers study, the total value of transactions in the first half of the year was down 13 per cent, from £495 million the six months prior.

But Mr Cook remained confident about a quick recovery based upon predatory pursuits of cash strapped companies.

He said: “There are quite a few numbers of distressed companies in the construction sector, so I would imagine activity will improve before the end of the year and get stronger over the next 18 months.

“It will, however, be much more predatory or opportunistic buys.”

Larger UK construction companies have continued to signal their interest in future acquisitions.

Following strong first quarter results Rok’s chief executive Garvis Snook admitted his firm was “always looking” for new businesses to buy. He said the company aimed to acquire about five firms each year.
Mr Cook said: “At the smaller end of the market we are definitely seeing more and more firms in a distressed situation.

“And the UK property market is still considered to be a good long-term investment.

“Right now people are speculating. There is still some way to drop, so they are just sitting back and waiting to see how low the prices do go.”