Clifford Chance
Our Insights into M&A Trends - Global Dynamics – January 2013
28 July 2013
With the turbulent year that was 2012 now behind us, it’s a good time to reflect on how the global M&A markets fared and what we can expect to see in the year ahead.
2012 will be remembered as yet another challenging year for global M&A activity. The global macroeconomic slowdown, continued turmoil in the Eurozone and the potential for political change in a number of key markets all contributed to suppress the appetite for deal-doing. Despite many companies enjoying the benefit of a robust balance sheet and a reduction in average EBITDA multiples over the period combined with relatively stable equity markets, boardroom confidence for strategic M&A remained weak. M&A in 2012 fell 2.5% in value terms from 2011, although there was a glimmer of hope with a stronger performance in Q4 – particularly in the US.
Looking forward for 2013, the picture remains uncertain – but there are grounds for cautious optimism. The slowdown in activity over the past few years has resulted in an increasingly congested deal pipeline and there are many strategic deals to be done when the appetite returns. We are seeing growing confidence amongst many US corporates and, whilst the issue of the US debt ceiling looms on the horizon, we expect this confidence to contribute to an upturn in global M&A activity in 2013. If Mario Draghi is right to believe the risk of Eurozone fragmentation is behind us and we can move to a period of continued stability, one can anticipate a modest increase in European M&A activity, particularly amongst inbound investors seeking attractive acquisition opportunities whilst valuations remain relatively depressed.
However, in the short term the M&A landscape will remain volatile – companies need to continue to create shareholder value and outperform competitors, and so will continue to seek suitable opportunities where they can. We expect to see a number of trends developing, notably: companies in developed markets accessing the expanding consumer base in emerging markets, such as Africa, India and South East Asia; growth market buyers looking to purchase leading industrial technologies and luxury brands in developed markets. Finally, divestments of non-core businesses will continue throughout 2013, particularly in the financial institutions sector, as the impact of regulatory change and increased capital requirements drives further activity.
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Our Insights into M&A Trends - Global Dynamics – January 2013
