The credit crunch has made life difficult for acquirers contemplating major strategic moves, and deal volumes are on the decline as the financial markets continue to struggle. However, according to professional services firm PricewaterhouseCoopers (PwC), the business services sector is bucking the trend with M&A deal flow on the increase, in part due to continued private equity activity.

In the UK, business services deal volumes reached a five-year high, with 517 transactions recorded between 1 July 2007 and 31 July 2008 compared with 480 in 2006/7. Although deal values dropped during the same period, PwC attributed the increased deal flow to the business services industry being dominated by medium-sized companies completing mid-size transactions, such as in-fills and bolt-ons – and so credit availability has had less impact than in other sectors.

Business services has also remained popular with private equity investors who have been executing buy-and-build strategies in the mid-market.

Simon Hawes, head of Business Services at PwC, said: “Private equity firms have a real opportunity to pick up some good assets. In the last major downturn in 1991/92, corporates began spinning out non-core assets following rationalisation and restructurings. If this trend is replicated it will produce attractive buying opportunities.”