Which market sectors have been particularly active recently?
Mergers & Acquisitions (2nd edition)
Entering 2018, industrials, TMT, consumer and retain, business services and the energy sectors have all shown the strongest momentum in the Norwegian M&A market.
Dica statistics show that foreign investment has been particularly strong recently in manufacturing, real estate development and transport and communications, and historically it has been strong in oil and gas.
The government is in the process of developing tenders for the upgrade of its aged infrastructure, including road, rail and port infrastructure, and this is likely to drive further investment.
MIC for example, issued an announcement on 22 December 2017 calling for applications under the MIL to invest in the manufacture of certain products to substitute imports, such as vehicles and vehicle parts, tractors and trailers, telecommunications equipment, and machinery and inputs such as iron and steel. It announced on 26 December 2017 that it was seeking applications under the MIL to invest in certain logistics services in major cities and logistics hubs, such as dry port services, bonded warehouse services and highway bus and freight terminals.
The banking and insurance sectors are also generating interest from foreign investors. No foreign insurer has been awarded a licence to date 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). However, on 24 August 2017, the Ministry of Planning and Finance (MOPF) issued Notification No 87/2017 establishing a board to review and select foreign insurance companies for licensing.
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). No approval has been provided to date for such acquisitions.
Instead, foreign banks are currently permitted to offer corporate and wholesale banking services to foreign-owned companies and Myanmar banks after establishing a branch in Myanmar with a licence from CBM. Thirteen foreign banks have established branches in Myanmar to date. CBM officials have in the past indicated that it is considering options to liberalise restrictions on foreign banks, and on 8 December 2017, it issued Directive No. 9/2017 permitting foreign banks to provide export financing to local export businesses with its prior approval.
Over the last years the energy, hotel, food, fish, cosmetics, metallurgy, IT, telecoms, insurance and retail sectors have been active. One of the most important transactions of the last two years is the ownership unbundling of the Hellenic Electricity Transmission Operator (ADMIE) in a triple transaction where PPC sold 24% to the Chinese grid company State Grid, 25% to a publicly owned SPV and transferred 51% to its own shareholders through a capital reduction via the Athens Stock Exchange.
A further major transaction still pending is the sale of 67% of the Thessaloniki Port Authority shares to the joint venture of Deutsche Invest Equity Partners GmbH, with its subsidiaries CMA CGM Terminal Link SAS and Belterra Investments LTD having committed to invest 180m euros in the port of Thessaloniki. A part of the Pireaus port had preceded with the Chinese Cosco acquiring 67% of the Piraeus Port Corporation’s share capital.
Other major transactions completed over 2016-2017 include the acquisition by Sklavenitis (the company owning the largest chain of Greek supermarkets) of the insolvent Marinopoulos SA supermarkets, through an agreement for the restructuring of the latter; a large insurance sector merger with ERGO Hellas absorbing the formerly state owned ATE, and the acquisition of the Greek company Taxibeat by the German Daimler-Benz group.
According to statistics from MergerMarket, with Brexit discussions in full swing and despite the uncertainty caused by the German federal election, there was a healthy appetite for German assets in 2017. The industrial and chemicals sector remained robust throughout the first three quarters of the year, topping the charts with 188 deals reaching nearly EUR 60bn. Most notably are the Praxair-Linde merger, which accounted for most part of total deal value, followed by Deere & Company’s acquisition of Wirtgen.
The TMT sector maintained its runner-up position in terms of deal volume with 114 deals, exceeding a total deal value of EUR 5bn. Sector activity is supported by the state-backed Industry 4.0 initiative, aiming to establish the manufacturing sector at the forefront of automation and digital innovation. Business services remained the third most active sector in Germany with 75 deals totaling c. EUR 1bn in deal value.
3.1 M&A activity during 2017 was strong and vibrant across a broad spectrum of industry sectors.
3.2 Perennially strong sectors such as pharmaceuticals, manufacturing, real estate, FMCG, and general wholesale and retail distribution across many product categories continued to surge ahead, building upon the momentum having gathered in recent years. 2018 and 2019 are also expected to see continued expansion of M&A activity in these key established sectors.
3.3 Of particular note is the strong growth which was seen in M&A activity in 2017 in the technology space. Foreign investor interest in the technology sector surged markedly during 2017, with acquisition activity having been very positive in the areas of e-commerce and fintech in particular. The M&A transaction pipeline in these emerging technology sectors for 2018 and 2019 looks to be very positive, as Vietnamese consumers become more comfortable with transacting electronically and foreign investors move in to exploit the resulting rapid market expansion.
The pharma, media, IT and chemical sectors were particularly active and that will continue in 2018.
In 2017, the industrial (e.g. ABB/General Electric Industrial Solutions), pharma/life sciences (e.g. Johnson & Johnson/Actelion) and consumer sectors (e.g. Breitling/CVC, HNA/Dufry) have been particularly busy. In addition, 2017 produced numerous transactions in the banking and FinTech space, with numerous investments in startups in the tech and FinTech sector by established financial players. Private equity investors have been particularly active, recording the highest number of PE-related M&A transactions since 2007.
By value of transactions during January-November 2017, fuel and energy industry represented around 40% of the entire volume of the market and the service and retail sector – around 30%.
From what we have seen so far the financial markets, agriculture, industrial goods and retail sectors seem to be particularly active.
The government sector remains the most active sector in Qatar based on the hydrocarbons industry and major infrastructure projects.