The sharp jump in the demand for external finance in 2000 owed much to an equally
sharp increase in merger and acquisition activity.
The number of companies acquired, 587, compared with 493 in 1999, but more important
than this was the size of the companies involved.
The average price paid per company in 2000 jumped to £182 million compared with
£53 million in 1999. Nearly three fifths of the total amount paid, £106.9 billion,
was covered by the issue of ordinary shares (£65.6 billion) with the remainder being
paid for in cash (from borrowing and/or a run down in deposits).
In 2001 and 2002, reflecting a more subdued economic environment, merger and takeover
activity fell back. In 2002 just 430 companies were acquired at a cost of only £25.2
Thereafter, the volume of merger and acquisitions picked up sharply, reaching 741
acquisitions in 2004, 769 in 2005, 779 in 2006 and 869 in 2007 before falling back
to 558 in 2008. In 2008, the average price per deal rose to £65 million from between
£32 million and £42 million in the 2004 to 2007 period.