Mergers and acquisitions in the UK construction market have effectively ground to a halt in the wake of the credit crunch

According to Mergermarket, a mergers and acquisitions (M&A) intelligence specialist, the volume of deals in the sector dropped to zero between June and August.

Taylor Wimpey鈥檚 拢74m fire sale of Taylor Woodrow, its construction arm, to Vinci in September has been the sector鈥檚 only deal since May.

The slump followed a flurry of nine deals in April in the run-up to the deadline for changes to capital gains tax.

Partnerships and individuals now pay a flat rate of 18% on gains when they sell up, compared with a previous maximum of 10%.

Richard Kelly, construction partner at BDO Stoy Hayward, said: 鈥淭he M&A market is driven by credit so in the absence of bank funding you can鈥檛 do deals. What you鈥檝e also got is falling asset values so even those companies with cash are holding off until things stabilise.鈥�

In the absence of funding, you can鈥檛 do deals. Even those with cash are holding back.

Richard Kelly, BDO Stoy Hayward

The figures relate to all transactions with a value of more than $5m (拢2.9m) across the contracting, housebuilding, consultancy, architect and building supplies markets.

In the past year there has been a total of 42 deals, which was the same number as in the year to September 2007. But overall the deals were worth 拢1bn, which is dwarfed by a figure of 拢8.4bn over the preceding 12 months.

One M&A specialist said the market could be depressed for the next two years. He said: 鈥淚 can鈥檛 see any major pick up over that time. There may be the odd opportunistic deal but construction companies have shut up shop because there is less building going on.鈥�

Other deals in the past year include Balfour Beatty鈥檚 拢45m purchase of Dean & Dyball in March and the 拢41m acquisition of Richardson Projects by Rok in April.

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