Leading analyst Douglas Jackat Numis says that corporate activity is likely to remain muted, constrained by overoptimistic sellers and limitations within the debt markets. He says: “We do not expect a sudden surge in equity-based mergers; corporate activity is likely to concentrate around quoted operators (with potential access to fresh institutional equity) making small, selective acquisitions and single-site tail-end disposals. “Often, the combination of ongoing margin pressure and limited scope to cut costs increases speculation that companies will merge to create synergies in order to support margins. At present, all the merger ideas involve Greene King: merging with either Marston’s or Mitchells & Butlers. We believe neither transaction is likely in the foreseeable future, based on: control, valuation and cultural differences.” Jack believes it is more likely that Greene King, Spirit Pub Company and Fuller Smith & Turner, in particular, will look to acquire high quality pubs (in groups or individually) and all quoted pub operators will continue to sell tail-end pubs (mostly to individuals). Jack points out that UK banks still have £1bn of debt in the pub, bar and nightclub sector that will need to be repaid or written down. He says that the debt overhang should lead to further disposals, particularly in the high street market and that over the next year,” banks should be deciding which of their businesses they like and which they think they can exit”. He says: “Overall, we expect the market for corporate transactions (excluding single site deals) to remain lacklustre, largely due to capital constraints resulting from de-leveraging. As the ability to execute non-equity deals is severely constrained by the difficulty in raising debt (typically for sums in excess of £25m), quoted operators with access to fresh institutional equity capital are best placed to be acquisitive, but they are rightly being highly selective over what they acquire, in our view. Thus, we expect market transactions to remain dominated by: occasional deals involving high quality assets at high multiples; and low-value single-site transactions.”