While the credit crisis has scuppered M&A activity across the globe, it seems that Britain has fared particularly badly according to a new report. The results of the report that came out are quite surprising, suggesting that there has been a shift in philosophies regarding investment methods. It also mentioned the massive slump in merger deals that the UK is currently dealing with.
The main shift is an emerging industry that investors worldwide have grabbed hold of by the millions. This is Internet gaming. With the use of new software, it is now possible to scan prices globally in seconds and uncover risk-free betting opportunities which provide guaranteed returns of as much as 12% per month. Using software like one called ArbAlarm, ordinary people can now easily profit from this unique method of investment. Aware of this trend, the UK government recently announced through the Treasury that the profits made from sports arbitrage trading will continue to remain free of all tax. This includes income tax and capital gains tax on all profits.
In an interview, former City trader Rajeev Shah, author of ‘Sports-Arbitrage – How To Place Riskless Bets & Create Tax-Free Investments’ explained that an arbitrage occurs when different bookmakers’ prices on the same events overlap. In these cases, it is possible to bet on all of the outcomes in that event in such a way as to be guaranteed a total return which is greater than the total outlay. The mathematics of this type of trade are precise & the resultant profits are free of all risk.
While gaming has been profitable the volume of M&A deals in the UK has dropped off much more sharply than in the US and the rest of the world.
The figures reveal that the total value of UK transactions in the first half of the year slumped by 62pc, compared to a 42pc fall in US deals and a 35pc contraction in the value of global M&A. While there has been a dearth of multi-billion pound transactions in the UK, the US has seen a number of very large deals including Altria’s demerger of tobacco giant Philip Morris International, Time Warner‘s spin-off of its cable TV division and InBev‘s recently agreed £26bn purchase of Budweiser-brewer Anheuser-Busch.
However, in recent weeks, there have been increasing signs of life in the British M&A market, with Alliance & Leicester agreeing to be bought by Santander for £1.3bn, a private equity consortium working on a possible £3.4bn bid for business publishing group Informa and BAE Systems approaching Detica, a FTSE 250 IT security firm.
The analysis from RW Baird also shows that the market for smaller deals has remained relatively buoyant. There were 621 transactions worth less than £100m in the first six months of the year, which is just 15pc down on the same period in 2007. By contrast, there were just 27 deals greater than £1bn,
The investment bank’s research also reveals that the £500m mark appears to form a “watershed” above which transactions are very difficult to complete given the economic conditions and the state of the credit markets. “Smaller deals obviously have the advantage of smaller credit requirements – whether trade sales or private-equity backed – meaning committed buyers are more able to finance them with cash or equity,” RW Baird explained. “Above £500m, however, debt finance is largely unavoidable.”
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