What is the current state of the market?
Mergers & Acquisitions (3rd edition)
2018 was a stable M&A year compared to 2017, with €23 billion of transactions involving a Belgian acquirer, seller or target.* 2018 started off with a hostile takeover bid by NOVO NORDISK on the biotech company ABLYNX, which ultimately failed. With a bid largely exceeding that of NOVO NORDISK, ABLYNX was acquired in 2018 by the French pharma giant SANOFI for €3,9 billion. Another noteworthy transaction in 2018 was GFI INFORMATIQUE’s acquisition of the Belgian IT company REAL DOLMEN. A voluntary and conditional takeover bid was launched on Belgian REIT VASTNED RETAIL BELGIUM NV by its Dutch parent VASTNED RETAIL NV, but which ultimately failed. The announced sale of a portion of Belgian state-owned bank Belfius did not came through in 2018 and is likely not going to happen in 2019 as a result of the Federal elections in May of 2019. In Q4 of 2018, 25% fewer transactions were announced compared to 2017 and 16% less compared to Q3 of 2018. It can be expected that this downward trend will continue in 2019.
* According to the financial newspaper De Tijd and Dealogic
Bermuda is known as a first class center for international business. 2018 saw significant merger and acquisition activity for Bermuda headquartered (and often international stock exchange listed) companies in the (re)insurance market. Indeed, in January, American International Group announced that it would be acquiring Bermuda-based Validus Holdings Ltd for US$5.6 billion. Shortly thereafter, AXA's move to buy XL Group for US$15.3billion was announced. Most recently, Bermuda-based RenaissanceRe announced its plans to acquire Tokyo Millennium Re for US$1.5 billion. The deal is expected to close in the first half of 2019.
Although there was a reduction of approximately 8% in the amount of transactions closed in 2018 compared to 2017 according to Transactional Track Record (TTR), there continued to be a steady amount of M&A transactions that closed compared to the most recent years. In this regard, there were 166 reported transactions for an amount of approximately US 6.7 billion (non-confidential transactions), which represents an increase in the value of deals closed compared to 2017.
In addition, it is worth mentioning that there was an increase in the amount of transactions in the last quarter of 2018, which evidences an increase of confidence by investors. Some factors that continue to contribute to the increase in confidence as to the future performance of the Colombian economy, include (i) increase of the prices of oil, raw materials and other commodities, (ii) investment in major infrastructure projects, (iii) increase of the middle class, (iv) reduction of the interest rates, (v) control of inflation,(vi) entrance of Colombia to the OECD, among others.
Multi-jurisdictional and cross-border deals will continue to steadily grow in Colombia, as it continues to be an attractive market to multinational companies with the interest of growing in sectors such as technology, consumer, financial services and agroindustry. Likewise, Colombian companies will continue to foster acquisitions abroad, principally in Central America and member states of the Pacific Alliance. Indeed, an increase in cross-border deals in Peru in 2018 was evidenced arising namely to the synergies in both markets.
Croatia’s M&A activity slowed down in 2017 due to massive restructuring of Agrokor, the largest Croatian and regional supermarket / retain chain. The Agrokor crisis disturbed both Croatian economy and political scene and the comprehensive process of restructuring was brought to an end by reaching settlement with creditors in July 2018.
However, according to DELOITTE CROATIA M&A trends analysis for 2019, after several years of recession, the Croatian economy started to recover, posting a real GDP increase of 2.8% in 2017. Growth was driven mostly by the increase in the exports of goods and services, strong private consumption, investments and tourism.
According to MAZARS CINOTTI M&A Transactions Overview for 2018, in January 2018 the Fitch Agency raised Croatia’s rating from “BB” to “BB+” with stabile prospects. It was the first increase in Croatian credit rating since 2004. A total number of closed M&A transactions in 2018 has risen compared to 2017. According to Mergermarket M&A transactions database, there was a total of 22 deals closed in 2018 compared to 13 deals in 2017, which represents an increase of 69.2 % of total number of closed M&A transactions.
Active and with tendencies to improve.
Though the volume and value of mergers and acquisitions (M&A) with target companies in Austria declined in 2018, the Austrian M&A market remains stable. The number of M&A transactions completed on the Austrian market has decreased compared to the previous two years. In 2018, pursuant to the Ernst & Young market analysis for 2018, 324 transactions took place, which represents a decline of 6.1 %. M&A deals in Austria reached an aggregate transaction value of EUR 7.9 billion in 2018, which is a decrease of 46 % as compared to 2017. The main reason for this is the halving of so-called mega deals and the fact that Austrian companies are investing significantly more abroad. Last year, Austrian companies bought targets in foreign companies much more frequently: The number of takeovers in the "outbound" category rose significantly in 2018 by 13.8 %. The number of takeovers by foreign investors ("inbound") fell by 6.8 %. Within Austria ("domestic"), the decline was larger, 29 %.
According to EY’s M&A Barometer, the Czech M&A market was the most active one in the Central and Eastern Europe with 167 announced transactions in the first half of year 2018 with the estimated value of 10,4 billion USD which is a massive increase of 129 % compared to 2017. The reason is a significant number of high value transactions. The largest transaction was PPF Group buying Telenor´s Central and Eastern European telecommunicating companies. The value of this transaction alone reached 3.4 billion USD. Another significant transaction was the company Advent International acquiring Czech generic drugs maker Zentiva for more than 2 billion USD.
British Virgin Islands
2017 was another relatively active year for BVI M&A activity reflecting the global market which was the fifth most active year on record in terms of volume. Total volume declined slightly from 2016 while deal counts remained steady.
2018 saw the continuation of an unprecedented period of deal making across all sectors. The global conditions that drove dealmaking in 2018 remain at the time of writing - buyers continue to seek access to new markets and take advantage of continued low interest rates, whilst private equity funds actively seek to deploy or recycle capital through acquisitions and exits of existing investments. We anticipate that, despite global political and regulatory challenges, 2019 will see further strong deal activity with the Cayman Islands remaining at the forefront of global deal making.
The Companies Law and LLC Law were revised in 2018 and the Companies Law was amended in January 2019. The 2018 revisions represented a consolidation with amendments made since the immediately preceding revisions, changes connected with the Cayman Islands’ beneficial ownership regime and a general updating of references to other legislation, rather than material legal developments in the M&A space. The most recent amendments to the Companies Law, which entered into force on 1 January 2019, introduce changes connected with the Cayman Islands’ new economic substance regime.
Legislative reforms are entering final stages for the creation of a new restructuring regime in the Cayman Islands. The anticipated effect of the new regime is the proposed introduction of a court supervised restructuring moratorium outside of the winding-up process. Current timing estimates for the enactment is later 2019. It is anticipated that once those changes are enacted, there will be an uptick in the number of restructurings in the Cayman Islands.
French M&A activity remained high in 2018, despite the growing political tensions related to the Gilets Jaunes social unrest severely impacting tourism and hotel industries, global market volatility and the continuing uncertainty surrounding Brexit. The potential for a global recession in the course of 2019, combined with a narrower path to reforms for the Macron administration add up to uncertainty and may at last end up in a contraction in the French M&A. Yet, despite these headwinds, there are a number of positive factors that may support M&A activity: the upcoming adoption of so-called Loi Pacte paving the way towards a number of large privatisations (airports, gaming, energy) and a rather buoyant hi-tech small and midcap market.
Contrary to 2017, 2018 has been quite active in several market sectors. In addition, as Greek banks are pressured under the country’s restructuring programmes to divest the non-performing-loans (NPL) portfolios as well as the assets they have accumulated by seizing assets of distressed debtors, they are now accelerating the sale of tranches of such portfolios which may include distressed businesses and real estate assets and may be diversified by healthy loans as well in order to become attractive to purchasers. The banks’ institutional tools to this effect have improved and there is an increased mobility in this sector.
The number of M&A transactions by Japanese companies hit a record high in 2018 with steady growth since 2012, after experiencing a slowdown due to the global financial crisis in 2007 and 2008. The total value of M&A transactions in Japan also hit a record high in 2018.
Outbound transactions are sustainable in terms of both the number and value of the deals as many Japanese companies are seeking opportunities for outbound transactions to expand their markets outside Japan.
As for inbound transactions, some large scale transactions have been seen recently due to divestures by some Japanese companies as a result of a selection and concentration strategy.
Whilst global activity has declined year-on-year, the offshore sector recorded an increase in deals by both volume and value. We consider the typical M&A motivations remain as relevant as ever; scope for efficiency savings, gaining access to operational or sector expertise, upgraded systems and IT structures and expansion into adjacent industries and geographies. In addition, rapid technological and logistical advances are making industry convergence all the more common, with ‘Fintech’ becoming the new buzzword for this phenomenon.
The M&A environment is currently very healthy and can be said to be quite active.
The Myanmar Government implemented a number of important reforms in 2018, including implementation of the MCL, which has given fresh impetus to the local market. Some examples of such reforms include the liberalisations of trading restrictions and the banking and insurance sectors.
On 9 May 2018, the MOC issued Notification No 25/2018, setting out the criteria for foreign and local companies and foreign-local joint ventures to engage in retail or wholesale distribution in Myanmar. The MOC issued News Bulletins No. 2/2018 and No. 3/2018 on 26 July 2018 clarifying its standard operating procedures and administrative requirements for applications to engage in retail or wholesale distribution in Myanmar, and the list of priority goods which would be permitted for trading by foreign companies and foreign-local joint ventures.
There is considerable interest in this reform given the size of the market and lack of sophisticated trading companies. As of 5 February 2019, one wholly foreign-owned entity, and one foreign-local joint venture had already been registered with the MOC to engage in wholesale distribution, while one wholly local-owned entity and one foreign-local joint venture had registered to engage in retail distribution, in Myanmar.
The banking and insurance sectors are also generating interest from foreign investors. The Ministry of Planning and Finance (MOPF) also announced in Notification No 1/2019, dated 2 January 2019, the liberalisation of the insurance sector. It proposed to licence up to three foreign life insurers as wholly foreign-owned life insurers, and also to permit foreign life and non-life insurers to enter the Myanmar market through a joint venture with a local insurer. MOPF issued the application documents and information about the application process on 21 January 2019.
As of 5 February 2019, no foreign insurer has been awarded a licence under the Insurance Business Law of 1996 to undertake an insurance business in Myanmar (they may only conduct such a business in partnership with Myanma Insurance, the state-owned insurer, or in special economic zones under Notification 2/2017 of the Insurance Business Regulatory Board of Myanmar). The opening of the sector has therefore generated considerable interest among foreign insurers, particularly given the size of Myanmar’s market and the lack of penetration of local insurers.
Similarly, banking businesses are regulated by the Central Bank of Myanmar (CBM) under the 2016 Financial Institutions Law (FIL). Under the FIL, a foreign bank may only sell its business or acquire a local bank’s business (or a substantial part of either) with the approval of CBM. In addition, prior CBM approval is required for the (direct or indirect) acquisition of a ‘substantial interest’ in a bank (defined as 10 per cent or more of the shares in, or the capacity to control the management of, a bank). While no approval has been provided to date for such acquisitions, on 29 January 2019, the CBM issued Letter No. ma ba ba/baan si sit/1/(1/2019), permitting up to 35 per cent foreign investment in local banks with its approval.
This represents the latest step in the gradual deregulation of the banking sector since the first issuance by the CBM of a banking licence to a foreign bank in 2015. Thirteen foreign banks had established branches in Myanmar as of 5 February 2019, and while previously, they were only permitted to offer corporate and wholesale banking services to foreign-owned companies and Myanmar banks, on 8 November 2018, the CBM issued Directive No. 6/2018 permitting foreign banks to lend to Myanmar companies.
After seeing record levels in deal volume in 2017, it was not unsurprising that the Norwegian deal volumes retracted somewhat in 2018. In number of transaction, the market was down 21% compared with 2017. During the same period, the reported deal value decreased from €38,747m for FY2017 to €17,522m for FY2018, while the average reported deal sizes decreased from €391m for FY2017 to €261m for 2018. Still, in 2018,the Norwegian deal volumes reached the second-highest ever recorded, only surpassed by 2017.. Even if the of 2018 turned out to be turbulent both for global and Norwegian capital markets resulting from rising geopolitical and regulatory concerns, active private equity funds, low financing costs, available capital in the market, volatile oil and gas prices, high equity valuations and a strong focus on technology all contributed to a stable deal making environment. In spite of trade wars and increased protectionism in many countries throughout 2018, Norwegian buyers’ appetite for cross-deals continues to be relatively high.
Entering 2019, it seems as if the appetite for M&A transactions will continue to be strong also in 2019, with a relative robust pipeline of companies coming out for sale also this year.
The Peruvian economy grew 5.3% in November 2018, the highest rate since May 2018, and higher than expected by the market consensus (5.0%). The Ministry of Economy and Finance ratified that de GDP of Peru would achieve an expansion rate around the 4% by the end of 2018. According to de International Monetary Fund the expectation of growth for this year is 3.8%
Similarly, the M&A market in Peru has shown significant growth during the last year. While the number of realized transactions only increased in three, in comparison to 2017, the amount of the transactions has increased in 85%. During 2018, 155 transactions for US$ 9,133’000,000.00 were recorded. In comparison to 2017, the total value of transactions the was US$ 4,937’000,000.00.
The Philippines is one of the fastest growing economies in the world. Its Gross Domestic Product (GDP) grew by 6.4% in 2018 on the strength of a strong export industry, aggressive infrastructure development and increased investments from the private sector. Analysts remain optimistic that the Philippines can sustain its aggressive growth in the near future. According to the World Bank, the Philippines is the 10th fastest-growing economy in the world, stimulated by rising consumption, sustained remittance inflows, stable investment, improved government spending and accommodative monetary policy. The expansion of the Philippine economy has given space for new businesses to take hold thus reducing unemployment rates to historic lows. While there are signs of a slowdown, the Philippines remains a fertile ground for investments as it maintained its “BBB” investment grade from Fitch Ratings, while Standard & Poor’s Global Ratings upgraded the country’s credit outlook to “positive”.
Isle of Man
The M&A market in the Isle of Man is currently best described as being fairly active.
Despite the global uncertainty affecting the international markets in the second semester, the year of 2018 was very positive for M&A in Portugal, in particular in the real estate and tourism sector.
Acquisitions throughout the year were essentially backed by several international funds and other private investors from several different jurisdictions, in particular Spain, US, UK, Germany and France.
The year was also marked by the launching of the public takeover of EDP, the largest Portuguese company, by China Three Gorges and several other remarkable deals in the technology, energy and pharma sectors.
In 2019, M&A activity in Portugal may be slightly affected with the current international uncertainty resulting from the trade disputes involving the world’s power blocks, the tightening of the monetary policy by central banks, Brexit, worldwide political tensions and the European Parliament and domestic general elections.
Notwithstanding, a large number of factors will likely continue to positively impact the attraction of foreign investment and maintain the M&A deal flowing steadily in 2019, such as certain tax benefits, relatively inexpensive qualified workforce and operational costs, growing reputation as a start-up hub or historical levels of dry powder in the PE industry.
The market is going through a favorable period, with a reasonably high number of transactions (carried out both by strategic investors and private equity funds).
According to RBC (https://www.rbc.ru/economics/29/06/2018/5b34eb259a7947688431619b), during the first half of 2018 the total value of M&A transactions in Russia increased almost three times - to a 2014-2018 record of $13.4 billion, but the number of transactions turned out to be the lowest during the last 10 years.
In particular, acquisitions of Russian assets by foreign companies decreased by 15% if measured by total number of transactions and by 11% if measured by total value of transactions.
The trend that emerged at the end of 2017 — consolidation of transactions and increasing role of state-owned companies that make large investments – remains relevant. For example, VTB Capital was responsible for 18.2% of all M&A transactions. At the same time, the number of transactions involving small and medium-sized businesses continues to drop.
Major deals in 2018 included (source: http://mergers.akm.ru):
Acquisition by State Corporation “Deposit Insurance Agency” of 99.99% of shares in PJSC Promsvyazbank for $4.25 billion in March 2018.
Acquisition by Dubai banking group “Emirates NBD” of Sberbank’s Turkish daughter Denizbank for $3.2 billion in May 2018.
Acquisition by VTB of 29% shares in Magnit, the second-largest retailer in Russia, for $2.45 billion in March 2018.
Acquisition by Japan Tobacco of Donskoi Tabak for $1.7 billion in March 2018.
According to Thomson Reuters (https://www.thomsonreuters.ru/ru/about-us/press-releases/issledovanie-thomson-reuters-russian-m-a-na-rossijskom-rynke-m-a-sdelki-s-uchastiem-britanskih-kompanij-nahodyatsya-na-desyatiletnem-maksimume.html), Japan, British Virgin Islands and the United Kingdom were the largest investors in the Russian M&A market in 2018.
The market in South Africa follows the trend of the global economy and as such, has been and is currently, depressed. Commodity prices have been low. In addition, companies have been holding onto cash. M&A activity has therefore been relatively low but we have recently see an increase. Further increases are expected after the national elections in May 2019 which should create domestic political certainty.
The Nordic IPO market, and the Swedish in particular, has been notably strong in recent years and 2018 turned out to be a solid year (although not as strong as the record year 2017) in terms of, inter alia, the number of listings. It could, however, be noted that 2018 was a record year with respect to the number of transfers from Nasdaq First North to the Nordic main market.
The Swedish M&A market has recovered strongly after the global financial crisis and the level of M&A activity in Sweden has been relatively high during the last couple of years. Naturally, the majority of the transactions have been private deals, however, there have also been a number of public deals (entailing a notable increase compared to 2017). As a consequence of the continued favourable market conditions of the Swedish securities markets, IPOs have continued to play an important role with respect to exit strategies of e.g. private equity companies. This has naturally to some extent reduced the number of private deals (especially in large cap). During 2018 (as well as during 2017), we have seen a significant number of “dual tracks” processes where the choice between a private transaction and an IPO has been kept open until quite late in the process. This trend is accountable to the uncertainty on whether the current quite high valuations on the Swedish stock market will apply also going forward. Compared to 2017, we have during 2018 noted an increase in the number of dual tracks resulting in private deals instead of IPOs. If there is a shift in stock market valuations, a further increase of private M&A is to be expected as well as a further increase in the number of public takeover offers. It remains to be seen whether the number of IPOs will continue to decrease during 2019.
M&A activity in Switzerland continued to be strong. 2018 set a new record in the terms of number of deals with Swiss companies involved. As in previous years, the majority of M&A deals in 2018 were cross-border transactions. The largest outbound deals include Novartis' acquisition of AveXis (USD 8.7bn), Nestlé's acquisition of Starbucks' Consumer Packaged Goods and Foodservice distribution business (USD 7.15bn) and Richemont's purchase of the remaining 75% in YOOX Net-A-Porter, a leading online retailer of luxury goods (USD 3.2bn). The largest inbound transaction was Hitachi's acquisition of 80.1% of ABB's power grid unit (USD 9.4bn). The record level of M&A activity in 2018 was driven by transformation deals in different sectors and portfolio reshaping measures by Swiss corporates (e.g. Nestlé, Novartis and ABB). 2019 has started off well, which is shown by Sika's announcement on January 8 to acquire Parex from CVC (EUR 2.5bn) and CMA CGM's public tender offer for SIX-listed CEVA Logistics (CHF 1.65bn).
The Swiss market has seen a further increase in shareholder activism. Even large caps such as Nestlé (ThirdPoint) or ABB (Cevian) are the subject of such campaigns. Other noteworthy situations last year include Cevian's pressure on SIX-listed Panalpina and Cobas Asset Management's opposition against Aryzta's highly dilutive capital increase. More involvement by active shareholders and activists is expected in 2019.
2018 was another active year for the M&A activity in Thailand, which was driven largely by stronger economic growth and a more stable political environment. Moreover, the government has established and promoted the Eastern Economic Corridor (EEC) as Thailand’s new flagship investment zone. The EEC is expected to be a new important hub for trade, investment, regional transportation and a strategic gateway for Asia. Furthermore, there are numerous megaprojects relating to infrastructure in Thailand which are Public-Private Partnerships (PPP). The promotion of investment in the EEC and PPP projects stimulates macro-economic growth in Thailand, and there are several M&A projects with both direct and indirect investment relating to them.
The M&A market in the United Arab Emirates and the broader Middle East and Africa region was steady in 2018 following a depressed initial quarter. M&A activity increased 14% during the fourth quarter of 2017, the fastest rate of growth in six quarters, but activity in the first quarter of 2018 decreased by 21.8%*. However, overall in the first half of 2018, regional M&A deal values increased by 62% year-on-year and the UAE was the most attractive target country to overseas investors, with a total of 34 inbound deals valued at $6.6 billion. In the third quarter of 2018, the deal value in the region increased 105% ($10 billion in Q3 2018 from $4.9 billion during the same time last year and cross-border deal value increased to $9 billion from $1.5 billion in Q3 2017) despite the number of deals having dropped by 3%. By the end of 2018, the UAE had a total of 59 inbound deals valued at $7.7 billion. As we start 2019, it is anticipated that such deal flow will continue apace, reflecting increased investor confidence arising from the FDI Law.
*Source: Ernst & Young first-quarter 2018 M&A report
The market is robust. India is the fastest growing large economy in the world, and is also ahead of China. Infact several Chinese companies are now heavily invested and active in the Indian market. India’s GDP growth is expected to be 7.2% for the financial year 2018-19. India’s ranking was once again, upgraded by several notches, in the World Bank’s ‘Ease of Doing Business Report.’
As per newspaper reports, the value of announced M&A deals for the year 2018 was US$ 129.4 Billion. The earlier highest record was US$ 67.4 Billion in 2007. Thus, after a gap of 11 years the M&A deal volume significantly picked-up. Out of the total deals, there were five deals exceeding US$ 5 Billion. Domestic deal value was US$ 53.7 Billion. Cross-border M&A activity stood at US$ 69.2 Billion out of which inbound M&A was US$ 55.8 Billion. One of the largest deals in the e-commerce space in the world was the acquisition Walmart Inc, USA of Flipkart India for US$ 16 Billion.
2.1 The M&A market in Vietnam is strong and vibrant, notwithstanding its relatively small size in comparison with more developed markets.
2.2 Numbers and overall value of completed M&A transactions in Vietnam have grown steadily during the last two decades (and in particular during the period from 2016 to 2019), and are expected to continue to grow strongly during 2019 and 2020 and beyond.
2.3 Although Vietnam and participants in its M&A market were disappointed with the withdrawal of the United States from the Trans-Pacific Partnership (the TPP), the fact of the TPP not having come to fruition in its USA-inclusive form as hoped has done nothing to suppress the enthusiasm of the foreign investment community for M&A transactions in Vietnam.
2.4 The Vietnamese Government continues to achieve material progress in simplifying and streamlining administrative and regulatory procedures in Vietnam. These initiatives have made and are expected to continue to make material positive contributions to the strength and vibrancy of the Vietnam M&A market.
2.5 Vietnam-domiciled target companies continue to present excellent value propositions for the international investment community, in an economy which continues to grow consistently at rates above 6% and is clearly destined to become one of the world’s powerhouse economies as the 21st century unfolds.
U.S. M&A levels in 2018, as measured by dollar volume, rose approximately 15% over 2017, even though the number of transactions was basically flat. The increase was driven by a resurgence of “mega-deals” as well as a pick-up in private equity acquisitions and exits.
The year’s activity was heavily weighted toward the first half of the year, as stock market volatility weighed on M&A. The fourth quarter was the slowest quarter in 2018 for announced transactions, breaking a three-year run in which the last quarter of each year had been the busiest for M&A transactions.
According to data from China Venture, a total of 6,998 M&A transactions in the China market were announced in 2018, slightly more than the 6,870 transactions announced in 2017. The total deal value in 2018 was $576.834 billion, which is slightly lower than the 2017 figure of $587.781 billion.
Although the domestic Chinese M&A market continued to be active in 2018, it appears that the number of cross-border M&A transactions decreased. This was possibly due to China tightening its outbound investment and foreign exchange control policies in respect of some typical Chinese outbound investment destinations, such as the US, the UK, Germany and Australia. It is reported, however, that M&A deal volume between China and ‘Belt and Road countries’ continues to grow.
Both the economic reform and the legal reform adopted by the Egyptian government have helped create a stable and welcoming investment environment and have provided investment opportunities which overall induced an increase in foreign direct investments in Egypt during the course of 2018. We are also witnessing a steady increase in the M&A activity driven by both local players as well as international financial institutions and private equity players.
With the privatization program successful kickstart, the substantial list of planned offerings by the State during the course of 2019 alongside planned private sector IPOs, trading on the EGX is expected to steadily increase prompting economic growth and sustained development in the various fields of the economy ensuring a continued vibrant M&A activity.
Schemes of arrangement pursuant to Part VIII of the Companies (Guernsey) Law 2008, as amended are generally the preferred method of effecting a public takeover, mirroring market practice in the UK.
The volume of M&A deals in Hong Kong continued to increase in the first half of 2018, in line with the trend demonstrated during the second half of 2017. In contrast, the second half of 2018 showed a relative decline in the volume M&A deals compared to the first six months of the year. This decline was precipitated by several notable events, including an escalation in trade tension between the US and China, unrest in the Middle East, and uncertainty surrounding the Brexit negotiations. In addition, an increase in the regulatory burden faced by many businesses following the implementation of the General Data Protection Regulation (GDPR), covering all firms established in Europe or providing goods or services in the region, as well as the US’s Foreign Investment Risk Review Modernization Act (FIRRMA), likely impacted M&A deals involving targets in such regions.
According to Thomas Reuters data [source], the number of M&A transactions in Hong Kong fell from 1,252 transactions with a combined value of US$108.28 billion in 2017, to 1,050 transactions with a combined value of US$87.93 billion in 2018 as investors adopted a more cautious approach.
Hong Kong continues to retain its appeal in connection with both inbound and outbound M&A, fueled by several factors. Firstly, the city remains a central financial and trading hub, both within Asia and globally. Secondly, it provides a flexible regulatory environment when compared to many other leading global financial centres. Finally, it is significant that Hong Kong shares a cultural and geographic link with mainland China. This has fueled a trend of mainland Chinese companies buying listed companies in Hong Kong, and subsequently using that listed status as a platform for further fundraising.
However, and as a response to concerns relating to some of these trends, the SEHK issued a consultation paper in June 2018 to solicit views on proposals to amend its listing rules to curb so-called backdoor listings or reverse takeovers. Continuing restrictions on remitting funds out of mainland China have also had an adverse impact on M&A activity originating in the PRC, and, consequently, in Hong Kong.
Notwithstanding the uncertainty generated by Brexit, 2018 proved to be another growth year for UK M&A in terms of deal volume, while deal value remained on par with 2017. Notably, deals involving a UK company valued at £1 billion or higher reached a new high for more than a decade. 2019 is starting on a similar pace, with Takeda’s £46 billion acquisition of Shire completing in January.
With private equity firms continuing to expand into new sectors (including public to private transactions), corporates face more competition in the market which in turn is creating a more “seller friendly” market.
Following the upturn in Cyprus economy that has been evident over the last few years the market in Cyprus is showing significant growth both in terms of incorporation of new companies as well as the M&A sector. In particular, over the last 2 years there has been a significant increase in the volume of both local and cross-border mergers within the EU region.
Furthermore, in light of recent developments relating to BREXIT and taking into account that the Cyprus legal system is also based on common law and to a large degree has similarities to the UK legal system this could lead to a further increase in inbound cross-border mergers of entities which would need to maintain their head office within the EU.
Statistics report that in 2018, the Hungarian M&A market experienced transactions of a total estimated value of EUR 4.6 billion, making 2018 the most successful year since 2011. The market continued to be dominated by strategic investors over financial investors. On the other hand the ratio of domestic transactions versus international transactions dropped to 50% as compared to last year.
The stock market in Qatar has never been a very active market with only 46 listed companies. The last mergers of listed companies being the merger of Qatar Shipping and Qatar Navigation and of Barwa and QREIC took place in 2010. Recently in the government sector the merger of Qatargas and Ras Gas has taken place. In the banking sector Barwa Bank and International Bank of Qatar (IBQ) (both being unlisted financial institutions) agreed to a merger in which Barwa Bank will be the surviving entity. The merger is in its final stages of approvals. Last year, Vodafone sold to Qatar Foundation its 51% stake in the joint venture company it held with Qatar Foundation that holds 45% of the listed shares of Vodafone Qatar.
The current situation in the Slovenian market remains very desirable and attractive for domestic and foreign investors which are willing to participate in M&A transactions. Both investors and sellers have improved confidence in the economy which is encouraged by low interest rates. Consequently investors have high levels of cash reserves and are therefore seeking more and different ways to deploy capital.