At the end of October, I moderated a truly global webinar as our specialists covering America, Europe, the Middle East, Africa (EMEA), and Asia Pacific (APAC) contributed to an insightful and in-depth discussion of trends and opportunities in the global M&A market.
“Exciting times” is how Richard Peterson, Senior Director of Global Markets Intelligence, described M&A activity in the Americas. A combination of low interest rates, the availability of finance, companies looking to put their surplus cash to work, and companies seeking growth has helped M&A activity rise to its best level since 2007.
Source: S&P Capital IQ as of September 18, 2014.
Despite a deceleration in deal counts, Rich affirmed that the value of deals is increasing. In addition, the aggregate value of cross-border deals will top $1 trillion for the first time since 2007.
Analyzing transaction data from the S&P Capital IQ platform, Rich also discussed a rise in cancelled deals, which he attributes to increased competition, revised regulation, and changes in material expectations.
However, he concluded that today’s cancelled deals may be tomorrow’s transactions.
Silvina Aldeco-Martinez, Managing Director of Product and Market Development EMEA, presented quite a different picture for EMEA, where she described the post-crisis market activity as ”erratic”. Despite some increase in 2013 (8%), the year to date for 2014 appears largely flat.
In contrast to activity in the US, where the strongest sector of activity was Consumer Discretionary, Financials remains the strongest sector within Europe, with 66% of total deal activity YTD 2014 concentrated across the Financials, Industrials and Consumer Discretionary sectors.
Source: S&P Capital IQ as of October 14, 2014. Screening for closed transactions in the European Developed Markets between 2005 and 2014 YTD. *Total numbers include “undisclosed” industry data sorted by transaction value from highest (green) to lowest (red).
The market remains “at best, in recovery phase” with continued uncertainty at the larger deal end of the market. Paradoxically, larger deals are driving M&A activity in the region as strategic deals and the breakdown of conglomerates focusing on their core activities fuels the market.
Strong growth prospects
Phil Lee, Global Head of APAC Investment Banking and Private Equity Segments, commented that APAC has presented a consistent deal flow, with value above $408bn since 2007. This resilience is largely down to continued earnings growth and the fact that the markets were not as heavily leveraged as elsewhere.
Source: S&P Capital IQ as of September 30, 2014. For illustrative purposes only.
Continued growth is expected to increase APAC’s current 25% share of the global M&A market (already up from 15% in 2007). IPOs are at their strongest level in recent years and China and Korea in particular are seeing multiples falling. As a result, in the YTD China accounts for 50% of M&A transaction value. With lots of cash in the market and the use of equity currency in deals also popular, Phil presented a confident outlook.
During the webinar, our specialists also answered questions on the following topics:
- The impact of the ending of QE in the US
- How the geo-political issues affecting EMEA could evolve, and
- The risks of China’s slowing economic growth