M&A volumes are supposed to be falling by upto 46% in this quarter compared to last year levels, according to a recent BCG study. The study also mentions that companies will increasingly carry out stress testing of their own businesses and the acquired businesses during deal-making stages.
Of the companies interviewed and assessed by the study, around 20% of the companies were classified as "predators" and another 20% as "prey" ... while the other 60% could be either predators or preys based on how they deal with the slowdown. That means at a conversion ratio of 10%, around 2% of companies are expected to carry out M&A transactions.
Estimating the worth of all corporate wealth based on the market cap, we have a figure of US $40 trillion.
2% of that comes up to a little under $1 trillion or $800 billion to be precise.
Based on a Reuters article from April last year, the Global M&A volume reached levels of $ 1 trillion in just 107 days, which itself was a decline of 27% from 2007.
http://www.reuters.com/article/privateEquity/idUSN1742497620080417
"It took 107 days for merger volume to hit the $1 trillion mark in 2008, compared with 85 days in 2007 and 93 days in 2006." the article says.
The 46% decline then makes sense with a conversion ratio of around 20%.
That implies a volume of $2 trillion in 2009, which would have taken 220 days in 2008 but will take 220/(1-.46) ~ 400 days ~ 1 yr in 2009 because of 46% decline.
Bottomline: Around 20% of M&A deals between predators and preys goes to conclusion.
Of the companies interviewed and assessed by the study, around 20% of the companies were classified as "predators" and another 20% as "prey" ... while the other 60% could be either predators or preys based on how they deal with the slowdown. That means at a conversion ratio of 10%, around 2% of companies are expected to carry out M&A transactions.
Estimating the worth of all corporate wealth based on the market cap, we have a figure of US $40 trillion.
2% of that comes up to a little under $1 trillion or $800 billion to be precise.
Based on a Reuters article from April last year, the Global M&A volume reached levels of $ 1 trillion in just 107 days, which itself was a decline of 27% from 2007.
http://www.reuters.com/article/privateEquity/idUSN1742497620080417
"It took 107 days for merger volume to hit the $1 trillion mark in 2008, compared with 85 days in 2007 and 93 days in 2006." the article says.
The 46% decline then makes sense with a conversion ratio of around 20%.
That implies a volume of $2 trillion in 2009, which would have taken 220 days in 2008 but will take 220/(1-.46) ~ 400 days ~ 1 yr in 2009 because of 46% decline.
Bottomline: Around 20% of M&A deals between predators and preys goes to conclusion.
8 comments:
Ithought you were an IIM-A student.. but your intelligence doesn't reflect that. Hurt your ego.. wel yes it should!
10% of 20% = 2% .. correct.. nothing wrong here.
But you ignired the 60% which could either be predators or prey!!!
WTF?
also 46% decline means that in a time span in which we used to do 100 deals we know do just 54 deals.. So for the same amount of deals we need 100/54*220 days not the moronic calculations u've done!
Next time u brag abt ur chemistry olympiad, childhish CP's in class calmouring for some spotlight, remember that u aren't all that great, as u think u are!
not trying to deny nething, would simply restate BCG "The remaining 60 percent have the potential to be either predator or prey - and BCG estimates that up to one-quarter of these companies could become predators by rigorously strengthening their finances and reshaping their businesses."
So, another 15% have the potential to be a part of these simple calculations ... but it's a simplistic assumption to neglect these considering the approx. nature of my calculations (give me some space there mate ... if I weren't approximating 800 billion dollars as $1 trillion, the calculations would be more correct).
Regarding your second point, i just took another simplifying approximation of inverse(1-x) = 1+x ... not a disastrous approximation I'd say ...
Abt ur last comment, Avi ... I can only say that I am glad to have the credentials to afford to say "I least care".
and yeah ... one more thing, "Avi" ... u've chosen the perfect way to let others know about the "loser" within you ... wish u don't let my CPs affect ur academic career ... btw, ur comments made me feel that I've arrived in life ... thanks for keeping track of and enumerating all my achievements ... try using ur quant skills to mask ur shortcomings rather than downplaying others' insights, which you are not capable of comprehending !
!/1-x =1+x for small x.. i hope u knw that
I just know that 1/1-x = 1+x ONLY for x = 0
... using one instead of the other is justified based on the degree of approximation one is fine with.
I made a 25% approximation initially ($1 T for $800B), so was fine with an approximation of 25% here as well ... learn to "apply" maths and not just "regurgitate" theory ...
arrived in life :) Trust me .. too early to say that. you know u are a kid who wants all the attention but gets only from 'losers' like me
in which century are u planning to grow up?
go bark down someone else's alley ... if u think Murli Manohar joshi, CNR Rao, Anil Kakodkar are losers who couldn't stop adulating me ... or when one of the seniormost persons on the management committee of a $4B MNC company said that I was a "genius", they were trying to pacify a kid ... then do realize who the kid really is ... achieve even 10% of what I have achieved ... and then talk to me.
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