Transactions Blog

The current economic climate leaves a lot of companies exposed to lower trading volumes, pricing pressure, stretched client payments and cost structures that can not easily be aligned. Consequently cash flows come under a significant pressure and are sometimes insufficient to pay back debts or worse interest payments. Combining this with a banking sector that remains very prudent and needs to align their own risk and capital structure, and we have the perfect scenario for potential stand off between the two major pillars of our economy.

Can this be avoided?

The answer to this question can be positive but this requires immediate pro active action from the companies facing these difficulties.

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In a recent report, ‘M&A: Down but not Out’, by Boston Consulting Group and UBS based on interviews with chief executives of 164 publicly listed European companies, deal activity is predicted to increase.

This is in part due to the need for consolidation in some industries, the attractive price of assets and struggling companies needing new ownership.

The outlook for the mergers and acquisitions market in 2009 is therefore not all negative, although difficulties in securing bank debt looks set to continue. Locally there still appears to be a good appetite from funders for quality mid-market transactions.

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Reducing number of transactions, plunging equity markets, falling consumer confidence, tumbling oil price, … Could any month be worse than December 2008 ? Amid this turmoil, or shall I say in spite of this, we decided to launch our PwC Belgium Transactions blog. Because we want to communicate with our clients on the transactions environment relevant to Belgium.

The talk of the town these days is “when will the market catch up?”. Few months ago it was “after Christmas”, now some say “forget 2009”.

Our English colleagues in Debt Advisory are publishing an interesting paper on the Debt Market Outlook for 2009. Q1 2009 could see a temporarily return of some level of liquidity. After which the impending worsening of the recession will force the intensive care departments of the banks to run on double shifts.