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Distressed deals continue to fall

Acquisitions of insolvent businesses in the UK have continued to fall in 2011, according to research by Experian on behalf of the insolvency trade body, R3.

The figures show that during 2011, 181 out of a total of 3,146 acquisitions in the UK involved companies acquired out of administration or other formal insolvency procedures – equivalent to one in 17 of all acquisitions. This compares to 2010 when distressed deals accounted for one in 14 acquisitions (216 out of 3,003) and the peak of activity in 2009 when distressed deals represented one in nine of all acquisitions (318 out of 2,904).
Frances Coulson, R3 President, says: “The continued fall in acquisitions of insolvent businesses has little relation to the number of insolvencies, but is likely to be due to a combination of factors.
“Not only has funding for acquisitions been hard to come by, but with the uncertainty in the Eurozone, many companies will have preferred to focus on their core business. The more recent insolvency cases may have also included a high number of zombie companies which are of little interest to investors.
“However buyers are still active in the market. These figures may well reflect the trend to structure deals as asset sales rather than company acquisitions because it makes for a more straightforward and less risky transaction.”

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