What is the current state of the market?
Mergers & Acquisitions
The continued growth of the global M&A market also was reflected in the Austrian M&A market. Taking into account only transactions with a transaction volume exceeding €1 million, according to the annual M&A report of the specialist journal Austrian Banking Archive (Moschner, Österreichs M&A-Markt 2015, ÖBA 2016, 359), in 2014 372 published transactions took place in Austria, of which 242 were cross-boder transactions. The year 2015 saw an increase to 391 transactions, of which 270 were cross-border transactions, constituting an increase of 5%. In addition, the overall transaction volume in 2015 increased by 6.5% to €15.44 billion compared to 2014.
The average transaction volume in 2015 amounted to €14.84 million, which constitutes an increase of 16.3% compared to 2014. In 2015 for the very first time the number of non-Austrian buyers of Austrian companies exceeded the number of Austrian buyers of non-Austrian companies.
According to the Ernst & Young M&A market analysis for the first half of 2016 (EY M&A-Index Österreich 1/2016), in the first half of 2016 the M&A market has continued to perform well and the number of 182 published transactions constitutes an increase compared to the 132 transactions over the same time period for 2015. In more than one third of the transactions in the first half of 2016, non-Austrian investors acquired Austrian companies or shares in Austrian companies, whereby virtually to the same extent Austrian investors acquired non-Austrian undertakings. In about 27% of the transactions both the target and the acquirer were Austrian.
Based on the above, the outlook for the Austrian M&A market – in particular in the real estate, finance and industrial sectors – is strong.
Bermuda is known as a first class centre for international business. 2015 saw significant merger and acquisition activity for Bermuda headquartered (and often international stock exchange listed) companies in the (re)insurance market. In general 2016 has seen less merger and acquisition activity in Bermuda.
The leading M&A law firms have in general had 2015/2016 as one of the best years in history. Fire sales and pockets of activity caused the spike. Big deals had to be closed in record time, and there was a flight to quality. This phenomena, however, is restricted to the traditional market heavy hitters who hold the relationships and have the profile necessary to capture the work. The general market was depressed for the last two years due to the lack of confidence in the economic policy of the central government. Middle market deals and deals that were not urgent were held back and the levels of activity in general went down as a multiple of the GDP recession. That is a lot of work held back. The good news is that this depression may soon be reverted, and the M&A market in general is likely to pick-up.
British Virgin Islands
2015 was a relatively active year for BVI acquisitions with the Territory coming in third in terms of volume and second in terms of deal value compared to other offshore jurisdictions. The first half of 2016 has seen the number of BVI vehicles involved in M&A return to the peak levels of 2014.
After two blockbuster years, the first half of 2016 has brought M&A activity back to normal levels of activity with fewer megadeals and generally lower deal values. Although deal flow is lower than last year, H1 2016 was in line with historically strong M&A trends.
Despite the slow start to the year, we do not expect M&A markets to dry up in the coming months. Anecdotal evidence suggests investors are taking a balanced view and are biding their time until clarity returns. Some funds (particularly U.S. dollar based ones) and strategic buyers may see this as a time to make opportunistic bids for carefully selected targets. More broadly, the conditions that have driven M&A around the world for the past two years have not fundamentally changed and so we expect a steady, if not busier, second half.
ZL: As far as we know, in recent years, with the introduction of the positive national macro policies and the implementation of “Internet+”, “Going Out”, “the Belt and Road Initiative”, mixed ownership reform, deepening the reform of the financial system, industrial restructuring and upgrading, and other national strategies, the national economy achieves stable growth. And the Chinese enterprises to participate in the domestic and foreign mergers and acquisitions market also showed a sustained hot trend. With the continuous adjustment of the economic structure, the complete promotion of the reform of state owned enterprises, and capital market releasing the bonus constantly, we believe that, the market will lead to a new round of mergers and acquisitions tide.
M&A activity level during the last two to three years has been quite stable and there has been a significant flow of M&A deals in Finland, with a somewhat shifting mix in terms of public and private deals and key sectors. Deal flow has remained stable despite a number of macroeconomic challenges facing the Finnish economy, ranging from deteriorating productivity, high labour costs, and weak competitiveness of export-intense industries to the disproportionate influence of labour unions and stretched public sector finances.
The Nordic banks have weathered through the downturn relatively unscathed and access to bank financing has not been a significant bottleneck for M&A. Despite higher expectations, the Nordic high-yield bond market has been slow to expand to Finland and bank financing continues to be the prevalent form of acquisition and operative financing.
Economically, in general and regarding M&A activity in particular, Germany is one of the leading countries in Europe. 2015 was a strong year for the German M&A market. Nevertheless, with regard to cross-border activity, the falling rate of the Euro complicates outbound M&A activity for German companies, while North American and Asian companies find investments in Europe cheaper and thus more attractive. Another general observation is that a number of reports come to the conclusion that purchase prices compared to real values of deals are rather overrated and assume that the inner-German market is overheated. Nevertheless, regarding M&A activity Germany remains one of the leading countries in Europe.
There is no state organization or other authority in Greece compiling and presenting official market data measuring in specific the M&A activity, the relevant information being extracted mainly from data pertaining to the overall economic activity and reports of auditing/consulting firms and private firms providing company and financial market data.
According to publicly available data, 29 major M&A deals were announced in Greece last year, which added up to $1.4 billion in total, marking a 39% drop compared to 2014. While the vast majority of smaller private M&A deals taking place are not publicly announced, it may be assumed that the aforementioned published data accurately reflect the trends in M&A activity in the overall market.
Bearing in mind the market disrupting events which occurred in Greece during 2015 (i.e. two national elections, a referendum, the imposition of capital controls and the signing of the third memorandum with the creditors), it could be argued that the above figures are expected and justified.
The M&A environment is currently very healthy and the end of 2015 saw a bumper number of billion-dollar deals being reported and deal volumes settling at consistently strong levels, including deals with a Guernsey element. Analysis of deal activity across the offshore jurisdictions shows that Guernsey vehicles are mostly on the target side (rather than acquisition side).
Isle of Man
The M&A market in the Isle of Man is currently best described as being fairly active.
The overall number of M&A transactions in Japan has been steadily increasing since 2012. Growth in outbound M&A (In-Out) has been particularly strong, hitting a record high in terms of both transaction numbers and volume in 2015. In 2016, M&A activity remains strong, but Japanese companies appear to have become somewhat more cautious towards outbound M&A, perhaps due to uncertainty over the world economy. Meanwhile, there has been a substantial increase in inbound M&A (Out-In) in 2016, including cases such as the acquisition of Supercell by Tencent, a Chinese IT company, and the acquisition of Sharp Corporation by Hon Hai Precision Industry, a Taiwanese electronics manufacturer.
Following a substantial decline in oil and gas prices, the Norwegian M&A volumes for 2015 showed a clear decline compared with 2014. In number of transactions, the market was down around 18%. Entering 2016, the M&A market continued to decline in Q1 2016, and witnessed a 12% reduction in number of deals compared with the same period in 2015. During this period, foreign buyers seemed to retreat from the Norwegian M&A market due to collapsing oil prices and a more negative outlook for the Norwegian economy. However, during the second quarter, the capital market has witnessed a revival due to an upturn in major economies, with increased commodity prices and investors’ confidence improving. As a result, also the Norwegian M&A market started to pick up again at the end of the second quarter of 2016. We now witness an increase in foreign investors returning to the Norwegian M&A market, resulting in Norwegian M&A volume for first half 2016 improving by 1.8% compared with the same period in 2015.
Starting with the world financial crisis in 2008, the M&A sphere in Russia has been reducing its activity. The most recent major M&A transactions include the following: ‘United Capital Partners’ and ‘Gazprombank’ acquired ‘StroyGazConsulting’ for US$ 7 billion in April 2015; ‘VTB’ acquired ‘Tele2 Russia’ for US$ 3,6 billion in April 2013; ‘Rosneft’ acquired ‘TNK-BP’ for US$ 54,9 billion in March 2013; ‘Sberbank’ acquired ‘Denizbank’ for US$ 3,6 billion in September 2012; ‘Vimpelcom’ acquired ‘Wind Telecom’ for US$ 7,3 billion in April 2011;and ‘PepsiCo’ acquired ‘Vimm-Bill-Dann’ for US$ 5.2 billion in February 2011.
According to an overview of the M&A market prepared by KPMG, the total transaction amount in the M&A sector has been decreasing in the recent years, falling by 29% in 2015, with the total amount of US$ 55,8 billion. Most of the transactions were made in the telecommunications and media sector, while the most expensive transactions took place in the oil and gas sector and transportation and infrastructure sector.
However, market analysts note substantial growth in Russian M&A deals in January and February of 2016, with real estate development and finance industries making up 50% of the increase. Such developments can be attributed to the low base of previous years and the desire of Russian investors to secure their Ruble assets against devaluation.
There is very little in the way of market practice for public M&A in the Kingdom, despite the fact that the Saudi stock exchange ("Tadawul") is the largest in the region. There has only been one public takeover – the acquisition of HADCO by Almarai Company in October 2009 – since the M&A Regulations came into force. Although the infrastructure for public takeovers exists, appetite in the market is likely to remain quiet in the short term.
Foreign (i.e., non-GCC) investors should be aware that a single foreign investor, qualified to invest in the Saudi stock exchange, cannot hold more than 10% of the issued share capital in a listed company. In addition, no listed company on Tadawul can have more than 49% of its shares held by foreign investors in aggregate. To qualify as a foreign investor and be allowed to invest in Saudi stocks, a foreign investment fund must have at least SAR 3.75 billion (USD 1 billion) under management.
By contrast, non-GCC investors may own up to 100% of shares of private companies in the contracting, services, trading (retail and wholesale) and industrial sectors.
At present, there is much greater market interest in private M&A in light of the National Transformation Program 2020 ("NTP 2020") and Saudi Vision 2030 ("SV 2030"). While some investors might be cautious until national economic policies have become more detailed, inbound investment is being drawn in by national champions such as Saudi Aramco, SABIC and Saudi Arabian Industrial Investments Company ("SAIIC"). For instance, in May 2016, SAIIC and GE announced an MOU to co-invest in strategic sectors such as water, aviation, energy and industrials more broadly, to serve both the domestic market and beyond. Though some valuations might remain high, there can be no denying the attraction of Saudi Arabia for investment, given the resources and population at its disposal.
There is considerable activity in the market. Private negotiated transactions are common, both domestic and cross-border (inbound and outbound). There is no single underlying reason for the transactions. Foreign companies needing to deleverage have sold Thai businesses acquired by them in the past. Thai enterprises are expanding in the ASEAN area and some consolidation is evident in anticipation of the regional opportunities offered by the Asian Economic Community. Other companies are also re-organising assets with a view to fundraising and expansions.
In recent times, Malta has witnessed significant M&A activity across all sectors. Malta’s status as a preferred jurisdiction for the financial services, gaming and high-end manufacturing sectors continues to flourish. This has resulted in considerable M&A activity in the private sphere mainly involving share and asset acquisitions and cross-border mergers. The last few months have also been characterised by marked activity on the regulated market involving a number of takeover bids concerning companies operating in the telecommunications, IT and e-commerce and hospitality industries.
2015 was a record year for M&A activity globally, and the U.S. was no different. However, in the first half of 2016, as compared to the same period in 2015, the number of deals in the U.S. fell by 11%, from 2,585 to 2,291, with dollar values down 30%, from $822 billion to $577.2 billion. The decrease in value can be explained in part by the relative lack of mega-deals compared to 2015. Nonetheless, despite the market experiencing a slow down from last year’s activity levels, 2016 is on track as of mid-September to be the second best year for M&A since 2007.
The M&A market in Vietnam is strong and vibrant, notwithstanding its relatively small size in comparison with more developed markets.
Numbers and overall value of completed M&A transactions in Vietnam have grown steadily during the last two decades, and are expected to continue to grow strongly during 2017 and 2018 and beyond (particularly if the Trans-Pacific Partnership and the EU-Vietnam Free Trade Agreement are ratified and enter into force as anticipated).
The Vietnamese Government continues to achieve material progress in simplifying and streamlining administrative and regulatory procedures in Vietnam, which initiatives have made and are expected to continue to make material positive contributions to the strength and vibrancy of the Vietnam M&A market.
The M&A environment is currently very healthy and can be said to be quite active.
The first half of 2016 has seen strong M&A activity although not to the same levels (in either volume or deal size) as the previous 2 years. The conditions that have driven M&A activity globally for the past 2 years have not fundamentally changed and so we expect a steady, if not busier, second half.
Local statistics show the Romanian M&A market was 3rd best in the region in 2015, being surpassed only by Poland and Czech Republic. During such time, 120 M&A transactions have been successfully completed in Romania, with a total value of over EUR 3.2 billion, showing a growth of 23% in comparison to the previous year.
2016 appears to be a bit slow nevertheless, with Brexit, and local political context (local and parliamentary elections) playing a key role in such downturn.
2016 has been a strong year for M&A in New Zealand, with a higher than usual number of major listed company transactions. These include the NZME listing and pending merger with Fairfax New Zealand, Z Energy’s acquisition of Chevron’s New Zealand downstream assets, the Nuplex takeover and the potential Sky/Vodafone merger.
We expect the increased M&A activity will persist through the first half of 2017.
Despite predictions of a slow-down in the Chinese economy, there is steady and significant Chinese direct investment into New Zealand. There has also been a pick-up in private M&A activity after a relatively light start to 2016 compared with prior years.
Participants in the UK M&A market have faced significant uncertainties during 2016, relating to BREXIT during the first half of the year, and, following the vote to leave the EU, as to the implications for the UK's on-going relationship with the EU.
In addition to BREXIT, market participants have also faced uncertainty relating to the outcome of the US presidential election and the health of the global economy.
Taken together, these factors have contributed to the creation of a less certain environment within which to transact.
While the rapid devaluation of the pound against other major currencies has served to cushion the impact of this uncertainty to a degree and has helped to make UK based targets more attractive to overseas buyers, many potential investors are adopting a more cautious stance, awaiting a clearer picture of what the longer term implications of BREXIT might be for the UK and for UK based assets.
According to Transactional Track Record, during the first nine months of 2016 the M&A transactions in Spain have been similar to the ones registered during the same period in 2015, which was a very good year in comparison with 2014. These seems to mean that the M&A market has not been significantly affected by the lack of formal national government during almost a whole year. Notwithstanding the above, the last quarter of the year is becoming more active probably than the rest of the year. Therefore, the economy and the markets in general seem to be reacting in quite good mood to the clearance of the Spanish environment.
In the absence of big-ticket deals in 2016 (mainly due to political tensions at national level and increasing geopolitical issues in the region), the market was mainly dominated by mid-sized transactions. In this context, the total M&A deal volume in 2016 reached only USD 7.7 billion through 248 transactions, which is the lowest level since 2009. The deal volume was USD 22 billion in 2012, USD 17.5 billion in 2013, USD 18 billion in 2014 and USD 16.4 billion in 2015. While the total deal number remained more or less flat from 2012 to 2016, total deal value in 2016 dropped significantly by 53% as compared to 2015. (Source: Deloitte, Annual Turkish M&A Review, 2016).