Insolvency increase ‘leading to more corporate acquisitions’

Posted 01/02/2010

Issues of corporate law pertaining to mergers and acquisitions have become more important due to rising insolvency rates, according to an expert.

Research from insolvency trade body R3 has revealed that 67 out of 630 corporate merger and buyout deals in the fourth quarter of 2009 involved distressed businesses affected by administration or similar procedures.

In additon, over the course of the year one in eight acquisitions involved a company involved in insolvency, compared to a rate of one in 27 the previous year.

Peter Sargent, president of R3, stated this demonstrated that many companies are looking to capitalise on the low values of insolvent firms, which he described as a potentially positive trend.

He said: “These statistics represent businesses being given a second chance of survival.”

According to advice from the Confederation of British Industry last month, more businesses are set to be threatened by insolvency in 2010 due to limitations on the availability of finance.