Stocks rollercoaster another nail in M&A coffin

By Mathieu Robbins - Analysis

LONDON (Reuters) - Roller-coaster stock moves make it hard to price assets and play on the nerves of company executives, which in turn makes it difficult to pull off mergers and acquisitions.

And global stocks have had a volatile week, with a big emergency rate cut by the U.S. Federal Reserve offsetting heavy share falls on Monday and early Tuesday caused by fears of a U.S. recession.

A sustained fall in stocks could be the last nail in the coffin of the record M&A boom that supported markets -- and investment bankers' careers -- for the last three years, but even choppy markets erode the confidence needed to start big deals or finish off those in the pipeline.

On Tuesday, takeover talks between broker Cenkos Securities (CNKS.L) and its target UK merchant bank Close Brothers (CBRO.L) collapsed as the two sides failed to agree on price.

One source close to the talks said that while there were other issues that stopped a deal being reached, "without doubt the market had an impact".

As one senior London-based M&A banker who saw one of his deals collapse last week put it: "I think it's going to be tough. It will take time for sellers to figure out that current valuations are permanent, and buyers will be nervous that things could fall further."

When 2008 kicked off, investment bankers were moderately hopeful they could keep enough mergers and acquisitions ticking over to prevent too big a drop from the record volumes of 2007.

Though the credit crunch had all but killed off large private equity buyouts and M&A volumes had fallen from their mid-2007 peak, at least equity markets were reasonably strong.