The FINANCIAL — 2009 second half recovery raises optimism for 2010, mergermarket intelligence service announced today. gency said With overall deal value and volume ending the year 27% down on the previous year, 2009 was not a good year for M&A. The end of the year, however, showed signs that the recession is coming to an end and M&A is starting to pick up.
The last quarter of 2009 was the best quarter in value terms since the third quarter of 2008. With 2,523 announced deals valued at US$626.8bn, the quarter saw an increase of 35% over the same period in 2008; and of some 90% compared to the previous quarter. The quarter was also the biggest by value ever for Asian deals at US$177.1bn, 26% more than the previous high of US$141bn during the fourth quarter of 2006.
Despite frozen debt markets and reluctance by corporates to make deals, 2009 saw more mega deals than 2008 – seven deals valued at US$40bn+ compared to three in 2008.
Dramatic increase in insolvency transactions
2009 did set a new record, with numbers and values of insolvency deals eclipsing even the peaks of 2002. 2009 offered opportunistic buyers with the available capital the chance to take advantage of stressed and distressed companies, giving rise to a staggering 370% increase in the value of insolvency deals since 2008.
The US$95.5bn-worth of insolvency deals in 2009 is just $150m short of a combined total of US$95.65bn-worth of insolvency deals over the previous four years. Turning to deal volume, the 543 bankruptcy deals in 2009 equals the 543 deals recorded over the previous three years combined. They include high profi le “363” sales in the automotive sector – such as the sale of the bulk of General Motors assets as well as the sale of certain Chrysler assets.
Expectations for 2010
Though there is still uncertainty in the markets, there are signs that the momentum will carry into 2010. A resurgence in financial sponsor activity, corporates sitting on record levels of cash, and a thawing credit market, could signal a good year for M&A deal makers.
Large pharmaceutical companies will be on the look out for targets that can help replenish their drug development pipelines. The mega deals seen in 2009 could lead to divestitures required to seal these transactions as regulators scrutinize the announced tie-ups. On the consumer front, Kraft Foods continues to struggle to take over Cadbury and could turn its attention to the likes of Sara Lee or United Biscuits should its offer for the British chocolate company fail.
Morgan Stanley topples Goldman Sachs to top 2009 global M&A league tables
As anticipated, Morgan Stanley claimed top spot in the global value tables for 2009, with deals valuing a total of US$585.9bn, compared with Goldman Sachs’ US$548.6bn. By volume, Goldman Sachs took the top spot with 244 deals, a 13 deal lead over Morgan Stanley’s 231.
The dynamic duo of the M&A world have benefi ted from advising clients across the globe on the majority of the largest transactions in sectors as far apart as Australian commodities and American healthcare and technology.
JPMorgan takes third place in both the value and volume tables with its ranking due primarily to its role advising on US takeovers, most recently advising ExxonMobil on its US$40.4bn takeover of XTO Energy.
Europe: M&A roundup Year End 2009
European M&A down 55%
The 3,485 transactions, valued at US$472.8bn, announced in Europe in 2009 represent a decrease of 55% by value and 36% by volume from 2008, in which 5,455 deals with a total value of US$1,048.1bn were announced.
European M&A activity made up 27% of global activity by value and 37% by volume of deals in 2009,compared to 43% for 2008.
Financial Services and Energy, Mining & Utilities sectors continue to dominate; Iberia on the rise as UK & Ireland still on top Half of the total value of European M&A in 2009 – including six of the ten largest European deals of the year – took place in the Financial Services and Energy, Mining & Utilities sectors, up from 44% for 2008.
The UK & Ireland remained the largest M&A market in Europe, contributing 28% to the total value of European M&A. Iberia meanwhile experienced the largest increase as it contributed 13% to Europe’s total value, up from 7% in 2008.
Morgan Stanley overtakes JPMorgan in the league table by value; Rothschild 2009’s busiest fi rm to date Morgan Stanley was Europe’s leading advisory fi rm by value in 2009, topping the league table with 102 deals totalling US$255bn for 2009. Western Europe contributed 82% of Morgan Stanley’s total deal value in 2009, of which 77% comes from the UK, where it was second to Credit Suisse. Both fi rms are advising on
Kraft’s US$19.6bn hostile offer for Cadbury.
Rothschild tops Europe’s volume table for the year, with 136 deals valued at US$87.8bn.
Europe 2009: Surprising early return for buyout activities
The European buyout fi nancing recovery may have come earlier than expected. Q2 2009 saw a 70% increase in European buyout deals in value terms over the previous quarter, after the 73% and 48% quarterly
drops in Q4 2008 and Q1 2009 respectively. The growth gained momentum as Q3 and Q4 2009 reported 33% and 108% quarterly increases respectively. Q4 2009 was particularly strong, posting a massive 356%
increase in total value of mega buyouts (>US$500m) over the previous quarter.
Outlook for 2010
There seems to be a move away from mergers of necessity towards mergers of growth, as the Cadbury/ Kraft Foods deal signals. There is also an increase in mega deals, which the VW/Porsche transactionunderlines. As the uncertainty over Eurozone states’ sovereign debt levels increases, the euro may depreciate, in particular against the US dollar as investors seek security. This could lead to increased inbound ransatlantic activity as European companies become relatively cheap.
Americas: M&A roundup Year End 2009
North American M&A slow in 2009; 2010 looking more promising
After having dropped to a six-year low at the beginning of 2009, deal activity picked up steadily throughout 2009, suggesting a return to ‘normality’ for North American M&A deal activity for 2010. The last quarter of 2009
saw the announcement of 831 deals with a total value of US$221.7bn. It was the most active quarter by volume for the year and may act as the catalyst to re-ignite M&A in the region.
Even with the more promising fourth quarter, overall year-on-year values were down by just under 7% (only rescued by a number of blockbuster life sciences deals). While 7% may not seem too bad considering the
economic climate, it was the massive drop in deal volume that proved far more telling – a decrease of 26% from 2008. Comparisons with 2007 – possibly more indicative given the turmoil that enveloped much of 2008
– showed a far steeper drop of almost half by value in 2009.
Life Sciences, Healthcare and Energy sectors hold up in a challenging year
There were a few bright spots in 2009, the majority of which came as a result of rapid consolidation in the Life Sciences and Healthcare sectors. In the fi rst three months there were three deals in the space for an aggregated
value of US$151bn, including the years largest deal – the US$63.3bn takeover of New Jersey-based Wyeth by pharmaceutical giant Pfi zer.
The Energy sector has also seen a number of high profi le deals this year, with the US$40.4bn buy of XTO Energy by ExxonMobil – announced last week – topping the list. The acquisition is expected to result in oil majors
globally re-focusing by trying to execute similar deals, seeking targets with strong US shale gas operations.
US shale assets in particular will interest the majors because the technology used in those areas to extract resources can be used worldwide in similar formations, particularly in European countries such as France and Germany and in parts of Eastern Europe. Predictions are that XTO will serve as an example for majors to move back into the US seeking companies with large shale exposure. Texas based Marathon Oil or Arkansas’s Murphy Oil could very well start seeing acquisition interest.
Goldman leads the tables Goldman Sachs dominates the mergermarket fi nancial advisory tables for the US in 2009, ranking top in both value and volume of deals with US$367.3bn and 133 respectively. Morgan Stanley and JPMorgan round up the top three in terms of value, although their positions are reversed in the volume tables with JPMorgan advising on 118 deals, and Morgan Stanley on 114. Fresh from its integration of Lehman Brothers, Barclays Capital
had a solid year, coming in fi fth with 56 deals valued at US$233.3bn – up 15 places compared to the previous year.
Asia-Pacifi c: M&A roundup Year End 2009
Asia-Pacifi c M&A value increased in spite of global trends
While the rest of the globe saw decreases in M&A in 2009, the Asia-Pacifi c region held strong. With 2,194 announced deals worth US$421.4bn for 2009, the region fi nished the year with a gain of 5% in value, and a small drop of 5% in volume compared with 2008 – in sharp contrast with global declines of 27%.
For the year, Asia-Pacifi c made up 24% of global M&A value and volume, up from 17% and 18% respectively in 2008.
China quick to buy cheap resource companies, but struggled to close some deals
The deep depression in commodity prices in early 2009 provided a brief window during which Chinese buyers were able to snap up many energy and resource companies overseas to quench the nation’s thirst for raw materials at attractive valuations – but not without hiccups. The tie-up between Chinalco and Rio Tinto, China Minmetals’ bid for Oz Minerals, and China Nonferrous Metals’ partial offer for Lynas, all failed.
Sale of Asian bank stakes will subside, except in South Korea Another major theme in 2009 was the sale of Asian assets by overseas Financial Services companies. Citigroup and Bank of America both offl oaded more than US$7bn-worth of their Asian bank holdings; while US insurance group AIG, as well as European banking giants ING and RBS, each disposed of some US$3bn in their respective Asian operations. As the world economy gradually stabilizes, this trend should subside.
Murmurs of consolidation in the South Korean fi nancial services sector continue. Lone Star, the US PE firm which acquired a 51% stake in Korea Exchange Bank in 2003, is speculated to be mulling a sale of its stake in
2010 for as much as KRW 6trn (US$4.7bn). The South Korean government, which currently holds 66% stake in Woori Finance, plans to offl oad another 16%. Kookmin Bank and Korea Development Bank, both interested
in expanding their foothold, are named as likely bidders for other Financial Services companies in 2010.
Yuanta Securities and Cometrue CPA, two Taiwanese fi nancial advisors with mandates on the US$11bn threeway merger between LED panel makers Innolux Display, TPO Displays and Chi Mei Optoelectronics, made a surprise appearance in the regional fi nancial advisory league table by value.
The global Year End 2009 house league tables are based on announced transactions over US$5m in the period from 1 January 2009 to 31 December 2009. Deals with undisclosed deal values are included where the target’s turnover exceeds US$ 10m. Deals where the stake acquired is less than 30% will only be included if their value is greater than US$ 100m. Activities excluded from the league tables include property transactions and restructurings where the ultimate shareholders’ interests are not changed. League tables are based on the dominant geography of the target, bidder or seller.
All data correct as of 4 January 2010.
Nordic: Denmark, Sweden, Finland, Norway, Faroe Islands, Greenland and Iceland
Benelux: Belgium, the Netherlands and Luxembourg
Iberia: Portugal and Spain
CEE: Armenia, Azerbaijan, Belarus, Bosnia-Herzegovina, Bulgaria, Croatia, Czech Republic, Estonia, Georgia, Hungary, Latvia, Lithuania, Macedonia, Moldova, Poland,
Romania, Russia, Serbia, Slovakia, Slovenia, Ukraine
US (Mid-West): llinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota, Wisconsin
US (North East): Connecticut, Maine, Massachusetts, New Hamshire, New Jersey, New York, Pennsylvania, Rhode Island, Vermont
US (South): Alabama, Arkansas, Delaware, District of Columbia, Florida, Georgia, Kentucky, Louisiana, Maryland, Mississippi, North Carolina, Oklahoma, South Carolina,
Tennessee, Texas, Virginia, West Virginia
US (West): Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington, Wyoming
Greater China: China, Hong Kong, Macau, Taiwan
South East Asia: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, Timor-Leste, Vietnam
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Tel: +44 207 059 6348
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