Mergers & acquisitions increase

The acquisition of Cadbury by Kraft appears to signal another upswing in merger and acquisition activity that has been at a virtual standstill for the past couple of years. Certainly corporate and private deal makers are predicting that mergers and acquisitions will increase during the first half of 2010. This increase will be led by manufacturing, financial services and healthcare according to a survey by the Association for Corporate Growth which revealed that 82% of respondents expect merger activity to increase over the first half of 2010.

However, 40% of those surveyed also believe that a quarter to half of these deals will be distressed deals. For any organization facing up to the need to sell or go out of business, it is therefore essential to maximize business value in any way possible.

And an important component of this valuation, especially in the manufacturing sector, is asset value. Yet while many US organizations appear highly confident of the value of their corporate assets, claiming 95% accuracy of the asset register, in reality around 50% of assets on the books are actually no longer in use. As a result, a proportion of items on the asset register are still being depreciated after disposal, reducing profitability without just cause.