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Gresham predicts M&A upturn

Managers of the UK’s middle market companies are more likely be involved in M&A transactions this year than in 2001, according to the Gresham Monitor, a survey commissioned by private equity house, the Gresham Trust.

The survey of 100 directors of middle market companies aimed to assess the level of transaction activity in the sector. Half of the companies surveyed expect to undertake a transaction in 2002, a third expect to raise external finance and more than a quarter anticipate making an acquisition. Two-thirds of private companies, compared to one third of public companies, are likely to undertake a transaction.

Gresham believes the slowdown in the number and value of mid-market private equity deals, caused by unrealistic vendor price expectations, has created a pent-up demand for financing. Large technology deals have also diverted attention away the traditional core of the PE market, namely businesses in less fashionable sectors with ambitious management teams.

Gresham states that with more realistic prices there is scope for substantial private equity growth. Paul Thomas, finance director of the Gresham Trust, says: “Vendor price expectations are always slow to fall, the owners of businesses tend to cling on to the perceived value. It takes a while to flow through to a more realistic view, which is necessary for any upturn in the market.”