Company sales slow down as banks keep a tight grip on their purse strings; IN ASSOCIATION WITH Rensburg Sheppards.

THE market for buying and selling of companies in the UK has become weaker in recent times due to the tight-fistedness of the banks.

A survey by the Office for National Statistics, published yesterday, shows that UK companies are also conserving their cash when it comes to their overseas corporate transactions.

According to the ONS figures covering the second quarter of 2008, expenditure on acquisitions in the UK by British companies actually increased from pounds 4.3bn in quarter one to pounds 8.7bn in quarter two 2008. But this figure is fundamentally altered by just one very large transaction in the period which saw Pearl Group buy Resolution for a reported pounds 5bn.

Expenditure on acquisitions abroad by UK companies decreased from pounds 15.8bn in quarter one to pounds 5bn in quarter two.

Acquisitions in the UK by foreign companies decreased from pounds 20.7bn in quarter one 2008 to pounds 18.1bn in quarter two.

Significant transactions included the acquisition by the Thomson Corporation of Reuters for approximately pounds 8.5bn and the acquisition by Sunrise Acquisitions, a company formed by a consortium including Heineken N. V and Carlsberg A/S of Scottish & Newcastle for pounds 7.6bn.

The net value of transactions abroad by UK companies decreased from pounds 15bn in quarter one 2008 to just pounds 22m in quarter two.

This is as a result of an increase in the value of disposals abroad by UK companies which are offset by a significant fall in the value of overseas acquisitions by UK companies.

Warrington-based corporate finance specialist James Dow said: "The high level of disposals probably had more to do with the relative strength of sterling against the dollar. There was an opportunity to realise good profits from selling overseas assets and repatriating the proceeds into sterling."

Mr Dow, who is a founder of Dow Schofield Watts, points to the recent weakening of sterling. He said: "Looking ahead, with sterling weak, it won't be so good to buy overseas. And weak sterling diminishes the opportunity to realise profits from disposals overseas."

On the general outlook for corporate transactions, he said: "It's an overhang of the credit crunch. Just as when people try to buy homes with mortgages, in the same way it affects people trying to buy businesses.

"Banks want to see more equity in homes and they also want to see more equity in businesses.

It's no different."

CAPTION(S):

S&N was taken over; James Dow