US regains top spot; UK remains attractive to investors; Japan active with large-scale corporate carve outs
The latest Capital Confidence Barometer finds that more than half of Japanese respondents expect the M&A pipeline to increase in the next 12 months.
The Japan market in the last few years has experienced several large scale corporate carve outs from large conglomerate groups, and is expecting more de-conglomeratization and carve outs in the years ahead. As more global and regional private equity houses focus on what is seen as a once in a life time opportunity in Japan, the competitive landscape (and associated valuations) is becoming more fierce. In order to remain competitive, bidders are looking at value creation and operational and EBIDA optimization and improvement as the key differentiators and success factors for large scale corporate carve out deals.
The latest Capital Confidence Barometer also finds the US is the preferred place for M&A investment globally. While Brexit uncertainty continues, the survey finds UK attractiveness strong as investors rank it the second preferred investment destination globally. For Japanese investors Japan and the US outpace the UK (in third), China (fourth) and France (fifth).
The ongoing trade issues in a number of the major economies have not caused dealmakers to shelve plans. The imperative to transform outweighs the risk of uncertainty. As long as this continues, the drumbeat for M&A will go on. Deals continue to be powerful means to reshape portfolios and accelerate the transformation imperative facing CEOs.