Click cover to download

(Subscriber-only password access)

Not a subscriber?

Click here to join the FREE mailing list and receive password access

For many sectors, industries and countries, 2015 was a record year for mergers and acquisitions activity. The momentum that M&A gathered in 2014 spilled over into the following year, although it has since dipped in 2016, down 18 percent in the first half of the year, according to Dealogic. Current headwinds against global M&A activity include ongoing geopolitical problems, the troubled commodities markets and the fallout from the UK’s decision to leave the European Union. These factors, among others, have combined to rock the global economy.

UNITED STATES

G. Michael O’Leary

Andrews Kurth LLP

 “Since July 2014 the hydrocarbon-based energy complex in the US has been affected adversely by the prevailing low commodity price environment in response to the excess supply of hydrocarbons. Throughout 2015 there were at best only intermittent periods of significant hydrocarbon-based energy M&A activity. There was a substantial disparity between the value sellers attributed to their assets or operations and the value buyers were willing to offer for assets or operations. There were, and in 2016 have continued to be, distressed sellers that were willing or required to sell an asset or assets despite low values in order to reduce indebtedness and survive until industry conditions improve. During 2016, improving commodity prices have had a favourable effect on hydrocarbon-based energy M&A and, if the forecasts of even further price improvements by the beginning of 2017 prove correct, hydrocarbon-based energy M&A will likely continue to accelerate.”

UNITED KINGDOM

Daniel Wayte

Milbank, Tweed, Hadley & McCloy

“2015 was a record year for UK M&A, including the ongoing £79bn takeover of SAB Miller by Anheuser-Busch InBev. By most accounts, activity was strong across all sectors, and especially energy. In 2016 the market has softened as investors have faced uncertainties as to the outcome of the UK referendum on membership of the EU and, subsequently, the results of EU exit negotiations. Energy investors are also being deterred by uncertainty in government energy policy. However, the fundamentals of UK investments are unchanged and the devalued pound may create opportunities. It is too early to say if deals put on hold in view of the referendum will materialise but there are positive signs, notably SoftBank’s £24.3bn cash offer for ARM Holdings and GSK’s announcement of a £275m investment in two UK manufacturing sites.”

SPAIN

Joan Roca

Roca Junyent

“Over the last 12 to 18 months Spain has experienced an increase in M&A activity, although dealmaking has remained patchy as a result of ongoing political uncertainty. We have seen many transactions across a number of sectors, including distribution, banking, travel and real estate. The recovery experienced within the EU economy and, by extension, the Spanish economy, has attracted the interest of both sellers and purchasers looking to conduct business transactions in Spain. Transactions are analysed and negotiated, but the signing and closing is still difficult. There is a wide array of potential transactions, although only a few will likely end up being successful. In this sense, we have noticed an increase in M&A activity involving investment funds in certain strategic assets in Spain.”

PORTUGAL

Eduardo Rui Paulino

Morais Leitão, Galvão Teles, Soares Da Silva & Associados

“M&A activity has been increasing steadily over the last 18 months and has actually become quite intense over the last few months. The fact that many quality assets remain underpriced when compared to other European peers has been capturing the attention of many sophisticated international investors. In addition to a surge of activity in more traditional areas, such as banking, real estate and concessions, there has also been a lot of interest – and activity – in renewables, as many of the start-ups created in the last three to five years have begun to mature.”

LUXEMBOURG

Alexandrine Armstrong-Cerfontaine

King & Wood Mallesons

“The volume of activity was strong with several large ticket transactions, many of which involved Luxembourg. This is because cross-border transactions are often structured through one or more acquisition vehicles used to acquire different parts of a large group in different jurisdictions in the most legal and tax efficient manners. At the same time, Luxembourg’s economic activity was strong with a GDP increase of around 4 percent, with the expectation that it will continue to expand mainly through the activities of financial services firms, freight and telecommunications in 2016 and 2017. This translated into many acquisitions within the financial sector over the last 18 months as well as add-ons to existing businesses. Acquisitions in the life insurance and banking sectors remained flat due to persistent low interest rates which have impacted upon the growth of these businesses. However, many important players in the corporate and funds services sector were acquired over the last 18 months by corporate or private equity sponsors. For example, Astorg acquired SGG, Intertrust acquired Elian and Orangefield and Vistra announced their merger earlier this year.”

ROMANIA

Silviu Stoica

S.C.A. Popovici Nitu Stoica & Asociatii

“Without either spectacular growth or prospects for major developments, the Central & Eastern Europe (CEE) regional market continues to grow. It looks like more of a tempered growth, as the general feeling in the M&A environment across emerging Europe is still one of uncertainty. This uncertainty results in caution for investors when it comes to making deals in the region. So investors direct their attention toward more stable jurisdictions within CEE. Inside the country-sized clusters which feature a comfortable degree of stability and predictability, M&A deals are mainly fuelled by a visible, steady improvement in the quality of businesses. Entrepreneurs have learnt that organically healthy businesses with foreseeable growth prospects are the best lure for investors, irrespective of the industry. Leading sectors in the CEE remain technology, media and telecommunications (TMT), manufacturing and real estate. In fourth place is the finance, banking and insurance space. It is also worth keeping an eye on the retail, services and healthcare sectors.”

INDIA

Vivek K Chandy

J. Sagar Associates

“M&A activity in India has been reasonably robust over the last 12-18 months. The factors that are driving deals in the current market are a relatively positive economic outlook and a stable policy framework. Additionally, the election of a stable national government, holding a majority of the seats in the national parliament, has encouraged M&A activity. Certain policy steps taken by the national government, such as the liberalisation of the foreign direct investment policy and the introduction of legislation for regulating the real estate sector, have also led to an increase in M&A activity. Some of the valuations that had reached levels which did not make sense have now come down to realistic levels.”

CHINA & HONG KONG

Dr Ulrike Glück

CMS China

“M&A activity in China over the last 12-18 months has remained strong. We have seen more and more transactions where foreign buyers intend to enter into, through acquisition, certain market sectors, particularly sectors where the customers are state-owned enterprises. Foreign investors are also interested in acquiring shares in companies which cover mid-market segments. Some foreign investors, that are leaders in the top-market segment, want to branch out into the mid-market segment because they expect comparatively higher growth rates in this segment. Outbound M&A by Chinese companies is booming. Chinese buyers are aiming to buy technology leaders and innovators in Europe – for example, in Germany’s automotive supplier, machinery and automation industry sectors. There is also a strong interest in Chinese companies in investment in the overseas logistics industry.”

THAILAND

Chinnavat Chinsangaram

Weerawong C&P

“Over the last 26 months, though Thailand has been governed by a military government, merger & acquisition activity has remained active, particularly for major transactions. The key factors driving inbound and domestic deals are the need for expansion and liquidity in the market. For outbound deals, a number of major players in Thailand have fully developed their domestic businesses and have expanded through investments in the region. Recently, these major investors are more comfortable exploring outbound opportunities and making investments in foreign jurisdictions. The network of major domestic law firms in this region also plays an important role in facilitating this recent development. The retail and wholesale sectors have been particularly active for major Thai conglomerates – for example, the Berli Jucker acquisition of Big C and the TCC Holding acquisition of Metro Cash & Carry Vietnam. For inbound and domestic deals, we have seen growth in the insurance, logistics, real estate and infrastructure sectors.”

AUSTRALIA

Richard Graham

Clifford Chance

“2015 was a bumper year in terms of M&A activity, which is unsurprising for a number of reasons, not least of all the comparative devaluation in the Australian dollar to other major currencies, making Australian targets far more attractive to offshore buyers, as well as the continuation of the commonwealth government’s asset recycling programme, which has led to a number of record breaking privatisations, such as TransGrid by the New South Wales government. Whilst some key transactions have continued to emerge in the resources and oil & gas sectors, the transactions seen in Australia have demonstrated that other sectors such as infrastructure, real estate, industrials, healthcare and technology have also driven M&A activity. This trend is also reflected in the diversifying interest of Chinese investors in Australia – China is now the largest source of foreign investment into Australia.”

ISRAEL

Roni Abelski

Epstein Rosenblum Maoz (ERM)

“The M&A market in Israel has seen a great deal of activity in the last 12-18 months. A large portion of M&A transactions are focused on the high-tech sector where Israel has shown a strong record for innovation that is internationally recognised. This has led to an increasing number of global corporations, most of which have not traditionally been focused on investing in the development of technology, open innovation hubs within Israel to give their industries a technological push. This, combined with acquisitions in non-tech focused industries, means that the Israeli M&A landscape has been very broad. In terms of industries of focus, high-tech companies continue to dominate, especially in cyber and FinTech, where Israel is commonly regarded as a leading source of disruptive technology. Agro-tech and medical devices continue to show growth and account for a significant source of international acquisitions of Israeli companies.”

SAUDI ARABIA

Ziad Raheb

Al-Enezee in association with Holman Fenwick Willan LLP

“Overall, the number of deals has remained steady compared to last year and the total value of disclosed deals has actually increased. One of the main drivers has been the newly announced ‘Vision 2030’ which has set Saudi Arabia on an ambitious path aimed at diversifying its economy. Absence of any indication of a return of the previously record high oil prices has led to significant optimistic changes in the government’s policy which is now focused on encouraging long-term foreign and local investments in various sectors. These promising market circumstances have increased appetite for SMEs since they are expected to play a key role in the Kingdom’s future economy. It is also expected to generate increased activity in the industry, healthcare and education sectors.”

CONTRIBUTORS

Al-Enezee in association with Holman Fenwick Willan LLP

Andrews Kurth LLP

Clifford Chance

CMS China

Epstein Rosenblum Maoz (ERM)

J. Sagar Associates

King & Wood Mallesons

Milbank, Tweed, Hadley & McCloy

Morais Leitão, Galvão Teles, Soares Da Silva & Associados

Roca Junyent

S.C.A. Popovici Nitu Stoica & Asociatii

Weerawong C&P