Global M&A volume decline 14% in Q4 2011, Asia sees smallest fall
Hong Kong, 12 January 2012 — International M&A volumes decreased by 14% in the final quarter of 2011 compared to Q3 2011 and were down 18% compared to Q4 2010 (note 1) according to the Ernst & Young M&A Tracker. Globally deal values were down 25% in the quarter (note 2) and are now at their lowest level since Q1 2010.
The last three quarters of the year also saw a historically high proportion of cash only deals reflecting depressed share prices which made stock-financing an unattractive option for bidders. Asia saw the smallest fall in activity out of the nine regions analysed in the Ernst & Young M&A Tracker. Despite a drop in volume activity of 6%, Asia accounted for 28% of all global transactions, both inflow and domestic, second to North America with 34%.
Leading against the trend
While there was a global decline in deal volume and value, Singapore and Japan reported an increase in both for Q4 2011. Deal volume for Singapore rose by 6% quarter-on-quarter and the total announced deal value rose by 40% in the same period, while Japan's deal volume rose by 42% quarter-on-quarter and the total announced deal value rose by 73% in the same period.
John Hope, Asia-Pacific Transaction Advisory Services Leader at Ernst & Young, says: "When we asked businesses in Asia-Pacific about their views on the outlook over the next 12 months they expressed caution about the global economy but showed confidence in their domestic economy and in the Asia region. On the whole Asia-Pacific is still driving forward. Deal volume in Asia-Pacific is in part being driven by intra-regional cross-border activity in key markets including China, Japan, India, Australia and Singapore."
"Asia-Pacific remains an important destination for global investors. According to the Ernst & Young Capital Confidence Barometer released in October 2011, China continues to top the league for the most likely market for investment. And several other countries in the region including India, Australia, Malaysia, Singapore, Indonesia and Vietnam are in the top 10 global investment destinations."
Globally, Automotive was the only sector that saw deal volumes and deal value increase in the quarter although Media & Entertainment, Mining & Metals, Oil & Gas and Power & Utilities all saw a rise in deal value from Q3. Among the worst hit sectors by deal value were Asset Management, Banking, Consumer Products and Telecoms who all saw falls of more than 40%.
Hope says: "In Asia-Pacific we expect strong deal activity in the Mining & Metals, Oil & Gas, Consumer Products, Infrastructure and Financial Services sectors. As development continues in Asian markets and as many more consumers join the middle class, demand for commodities and services will continue to grow. Additionally businesses based in low growth developed markets will continue to be attracted to invest in higher growth Asian markets."
Notes to editors
Note 1: The announced deal volume data for Q4 2011 (cut-off date: 9 December) range from a minimum of 850 transactions reported by Mergermarket to a maximum of 1,350 by CapitalIQ. For the YTD 2011, the announced deal volume data range from a minimum of 4,324 transactions reported by Mergermarket to a maximum of 6,043 by CapitalIQ.
Note 2: The underlying announced deal value data for Q4 2011 (cut-off date: 9 December) range from a minimum of US$243bn total announced deal value reported by CapitalIQ to a maximum of $340bn by BvD (Zephyr). For the YTD 2011, the announced deal value data range from a minimum of $1,371bn total announced deal value reported by CapitalIQ to a maximum of US$1,720 by Mergermarket.
About the Ernst & Young M&A Tracker
The Ernst & Young M&A Tracker was compiled for Ernst & Young by MARC, the M&A Research Centre at Cass Business School from six different transaction data sources. Quarterly M&A activity levels recorded in Bloomberg, CapitalIQ, Dealogic, Mergermarket, Thomson and Zephyr are consolidated and compared to activity levels in Q1 2010 using a proprietary weighted-average methodology.
The Ernst & Young M&A Tracker, weights each database according to the total value of deals in their datasets from the start of the M&A Tracker in Q1 2010. This results in a broad picture of transaction activity. Transaction activity levels are rebased (indexed) to 100 at the base period - Q1 2010, hence a figure of 115 shows a 15% increase compared to base period, and a figure of 85 shows a 15% decrease compared to the base period.
The Ernst & Young M&A Tracker only considers 'change-of-control' deals and excludes privatizations, self-tenders, share buybacks, spin-offs, split-offs and recapitalizations. Transaction deal value has been set to a minimum of $10m. Deal activity is measured from the date of announcement and rumored deals are excluded. Transactions are credited in the country and sector of the target only.
About the Ernst & Young Capital Confidence Barometer
The Ernst & Young Capital Confidence Barometer is a survey of more than 1,000 senior executives from large companies around the world and across industry sectors. The objective of the Barometer is to gauge corporate confidence in the economic outlook, to understand boardroom priorities in the next 12 months, and to identify the emerging capital practices that will distinguish those companies that will build competitive advantage as the global economy continues to evolve.
About Ernst & Young
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