Global mergers and acquisitions bids rise 10% in Q2 2012
London, 27 June 2012 —Global volume and value of announced deals rose by 10% and 18% respectively in the second quarter of 2012 compared to Q1 2012, showing some signs of recovery after a long slowdown, according to the Ernst & Young M&A Tracker, released today. Despite these positive numbers, global M&A volume in Q2 is still at its second lowest level since Q1 2010 and is 26% lower than the same quarter last year.
The Ernst & Young M&A Tracker, based on announced bids (including completed, pending and withdrawn deals), is compiled by Ernst & Young and the M&A Research Centre (MARC) at Cass Business School from six different transaction data sources, which are consolidated and compared to activity levels in Q1 2010 using a proprietary weighted-average methodology. i(See notes to editors)
Regions: North America rebounds, Eurozone falls back
North America saw a q-on-q increase in bid volumes of 13%. By contrast, following a quarter of continued market volatility and increased political instability, M&A bid volume in the Eurozone region again fell in Q2 2012, down 17% q-on-q. This is the lowest level of M&A activity in the Eurozone since the start of the M&A Tracker in Q1 2010 and continues a trend of decline in volume, now stretching to a full year.
Dave Murray, EMEIA Transaction Advisory Services Markets Leader at Ernst & Young, says:
"Ongoing market uncertainty has clearly restrained Eurozone M&A activity in Q2 of 2012. That said, the small upswing in average bid value and a strong pipeline of mega deals could indicate an increasing level of potential confidence amongst buyers.”
The fall in M&A bid volume in the Eurozone region was mainly driven by a fall in domestic activity as the level of cross-border activity in the Eurozone increased significantly in Q2 2012, and is currently at 38% of all announced bids, the highest level since the start of the M&A Tracker in Q1 2010.
Global bid values were up 18% in Q2 2012 compared to Q1. However, this is still 22% below Q2 2011. Apart from Africa and Western Europe, total announced M&A bid value rose in all regions around the globe. The average announced bid value was US$318m for Q2 2012, representing an increase of 8% q-on-q.
As a result of numerous large announced transactions in the region, North America once again dominates global M&A announced activity in Q2 2012, accounting for 42% of global announced values.This is in contrast to the first quarter of 2012, when both of the top two announced bids were outside of North America.
UK, Germany and Italy show resilience
Bid volume in the UK rose by 13% q-on-q, whilst total announced value rose by 22% q-on-q in Q2 2012 and is currently 32% higher than it was in Q1 2010 – the base quarter for the M&A Tracker. Elsewhere, announced bid values involving Italian and German targets continued to rise, following the trend of the previous quarter, with increases of 65% and 88% respectively in Q2 2012.
“Speed of completion” slows
Continued global economic uncertainty means that deals are becoming increasingly difficult to complete: “speed of completion” has decreased by 16% q-on-q and is currently at its lowest level since the start of the M&A Tracker in Q1 2010. Currently, only 38% of all bids announced completed in the quarter, compared to 46% in Q1 2012.
Murray concludes: “However, with a number of significant transactions still pending this quarter, the level of successful completions is worth watching. If these deals do get across the line, we can infer a return in market confidence and renewed appetite to get deals done.”
iNote to editor:
Note 1: Note that the announced deal volume data for Q2 2012 (cut-off date: 15 June) range from a minimum of 940 transactions to a maximum of 1,297.
Note 2: Note that the underlying announced deal value data for Q2 2012 (cut-off date: 15 June) range from a minimum of US$251b total announced deal value to a maximum of US$401b.
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.
Based on announced deals (including completed, pending and withdrawn bids), 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 M&A Tracker includes “withdrawn” bids to avoid biases in volumes from quarter to quarter. As the analysis tracks announced volume, and several bids’ outcome are yet unknown, we do not exclude either the pending or the withdrawn bids, but treat each bid with an “unknown outcome”.
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 US$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.
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