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European M&A market stabilises post-Lehman

Stability is returning to the European mergers and acquisitions market in 2010, according to a study by CMS.

In the first European study to look at the M&A market before and after the collapse of Lehman Brothers, CMS draws on data from more than 750 M&A transactions in Europe.

Martin Mendelssohn (pictured), CMS Cameron McKenna corporate partner, says: "It clearly reflects the transition to a buyer’s market in 2007 and 2008. However, as more time passes following the Lehman Brothers insolvency there are now clear signs of a more balanced market for risk allocation between buyers and sellers."

The research shows several “hot issues” in M&A deals are more heavily negotiated post-Lehman. For example, negotiations over closing conditions have increased significantly, showing both sides are opting for more rigorous, explicit deal points before signing on the bottom line. More deals had bespoke conditions rather than just the usual conditions such as merger clearance or regulatory approval.

The period post-Lehman shows a notable decrease, from 61 per cent in 2008 to 48 per cent in 2009, in price adjustment clauses. This is most likely explained by the element of distress in many transactions leading to a lower, but fixed, purchase price acceptable to both parties. However, this comes against the backdrop of greater sophistication of purchase price mechanisms when they were used, the report says.

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