At the high end of the market, even though the economy remains difficult, large corporates are performing reasonably well and tend to be storing up cash.
Following a quarter of financial market volatility and increased political instability, M&A deal volume in the Eurozone region declined for the fourth consecutive time. However, North America was seen driving global M&A activity by bucking the trend of the last quarter.
Despite fall in deal volumes, average deal value in Eurozone at an all-time high
M&A deal volume in the Eurozone region fell again in Q2 2012 for the fourth consecutive quarter, down 17% q-on-q.
Interestingly, due to the announcement of a few very large transactions the total announced deal value in the region increased by a significant margin of 62% q-on-q in Q2 2012, albeit from a decade low in Q1 2010. An example of this is the withdrawn bid worth US$4.9b for German healthcare provider Rhön Klinikum AG.
The increase in total announced deal value in the region was driven mainly by an increase in average deal value to US$521m — up 97% q-on-q. The average deal value is currently at an all-time high.
At the high end of the market, even though the economy remains difficult, large corporates are performing reasonably well and tend to be storing up cash. And there are high levels of profitability. So again we can see that the large deals are attractive to investors.
Smaller companies are in a more difficult place in this economy. Access to credit is restricted, their deals are not perceived to be as certain as those involving bigger companies and they are associated with more risk.
Top bids Q2 2012 — including withdrawn and pending
Source: The Ernst & Young M&A Tracker, compiled for Ernst & Young by MARC, the M&A Research Centre at Cass Business School.
North America is bucking the trend
The shares of global announced deal values coming from North America and Western Europe in Q1 were almost the same (at 37% and 35%, respectively). But this quarter, North America’s share rose to 42%, contrasting with Western Europe’s 25%.
This was partly driven by a correctional fall in Western European M&A activity, which had jumped significantly in the last quarter due to the announcement of the US$90b Glencore-Xstrata merger.
North America saw a q-on-q increase in deal volume of 13% and a rise in total deal value of 37% q-on-q, with the latter driven by a number of headline bids. Even with Coty’s US$14b withdrawn bid for Avon Products discounted as an outlier, there was a US player in half of the top 10 transactions.
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