M&A Tracker, February 2013
M&A Trends for 2013
Focused, strategic deals will continue to be in vogue in 2013. However, the subdued sense of urgency and risk adverse approach to M&A means completing transactions will continue to pose challenges for management.
Focused, strategic deals will continue to be in vogue in 2013. We will continue to see strategic deals at the expense of opportunistic bids — i.e., fewer hostile bids and bidding wars — as it will remain a buyer's market.
New buyers are entering the arena. Asian buyers, including corporates from China and renewed interest from Japan, will continue to look for foreign assets. We also expect investments by Sovereign Wealth Funds (SWFs) in the developed markets to continue. Note, for example, that two of the top ten transactions in the UK in Q4 2012 were by SWF-linked entities (Abu Dhabi National Energy bidding for oil & gas assets in the North Sea and Norges Bank Investment Management acquiring Meadowhall Shopping Centre, as reported by Dealogic).
The completion of transactions will continue to be problematic. Both the pre-bid and the post- announcement periods will continue to remain longer than the historical average with a general sense of less urgency in the M&A market. To get a deal done requires even more skill in planning and execution than usual.
Regions: Asia is on the rise and will continue to remain buoyant and gain market share from Europe. Fairly positive market sentiment and an economic recovery in the US should ensure that North America continues to be the leading M&A region in 2013.
On the up:
- Retail and consumer products have benefited from a cautious recovery of the consumer market and interest from Asia in brand-type businesses.
- Real estate, has been boosted by the uptick in equity markets and improved business sentiment.
- Transportation has gained from overcapacity in the developed markets.
- Financial services have been hit by regulatory pressure, leading to increased divestment activity. Many firms are looking to exit non-core markets.
- Extractive industries are suffering a hangover from a mini-boom, except in the US, where the sector is strengthening by investment in shale gas exploration and fracking redrawing.
The new BRICs: With the recent economic figures from Brazil, India and China, it appears that the glow of the BRICs is slowly fading. Instead, we can look at the Ernst & Young M&A Maturity Index 2012 to identify the M&A high climbers. Malaysia, the UAE, Turkey and Poland are all markets of great interest and we predict that 2013 will be the year when many corporates look beyond the BRICs for growth.