Which market sectors have been particularly active recently?
Mergers & Acquisitions (3rd edition)
The pharma, tech, biotech and chemical sectors were particularly active and that will continue in 2019.
The (re)insurance sector has been particularly active over the past two years. This was largely a result of insurance groups seeking to consolidate but targets have been acquired by parties looking for a way in which to either (i) generally access Bermuda’s (re)insurance market or (ii) specifically access or increase its participation in a specific sector of the market (for e.g. the insurance linked securities market).
The principal industries that have evidenced M&A transactions are the financial and insurance sectors (according to TTR, 25 of the 166 operations were undertaken in these sectors) followed by the health and retail sector. M&A transactions are also expected to significantly increase in other key industries such as logistics, technology, real estate, infrastructure and agroindustry.
According to Mergermarket M&A database in 2018, most of the transactions were focused on target companies which operate in following sectors: leisure, manufacturing, industrial products and services, consumer and utility sector. Croatia’s main economy growth sector remains tourism.
Insurance, snacks, pharmacy business, convenience stores, solid waste management, plastics, pharmaceutical, cargo handling at the airport, sale of consumer products.
According to the Ernst & Young market analysis for 2018, of 324 transactions that took place in 2018, 81 concerned the industry market followed by 73 transactions in the technology sector and 72 transactions in real estate. For foreign buyers particularly, the Austrian technology sector and in particular software companies are highly sought after.
The most significant transaction in 2018 was the sale by Steinhoff of Kika/Leiner to the Signa Group. Kika/Leiner is a leading Austrian furniture company with more than 5,000 employees and more than 70 locations in Austria and Eastern Europe along with a substantial real estate portfolio. Kika/Leiner was part of the Steinhoff Group since 2013. This transaction was a landmark-transaction in terms of timing (the transaction was completed in an extremely short timeframe) as well as volume-wise and involved the securing of thousands of jobs. This sale marks a highlight in the months of fwp providing restructuring advice to the Steinhoff Group ever since the Steinhoff Group was hit by alleged accounting inconsistencies. The KIKA/Leiner transaction is considered a major contribution towards the stabilising of the Kika/Leiner Group.
The EY’s M&A Barometer ranked the real estate market with 18% share of the announced transactions as the most active market sector in the first half of year 2018, the technology market with 13.2% as the second followed by the energetics, consumer goods market and media and entertainment industry markets, each exceeding 9%.
British Virgin Islands
In 2016 – 2017 the most active sectors included natural resources, IT, media and telecoms. Significant deals included the acquisition by the Virgin Group, owned by Sir Richard Branson, of a majority interest in BMR Energy, a renewable energy group with operations throughout the Caribbean and Latin America, from American Capital; the acquisition by MegaFon of a controlling stake in Mail.Ru Group (one of Russia’s largest internet and social media groups); the acquisition by The North West Company Inc of Road Town Wholesale Trading Ltd (a BVI-based retail and wholesale conglomerate); and Unilever’s acquisition of eight BVI subsidiaries from the Latin American personal and home care giant Quala Inc.
The technology, media and telecommunications, insurance, real estate and healthcare sectors continue to dominate deal flow. Through 2018 and 2019 to date, we are continuing to see increased deal activity and consolidation in the fiduciary and fund administration services sector. Buyers are also showing continued interest in opportunities in the FinTech industry as the Cayman Islands emerge as an eminent global FinTech hub.
2018 activity remained strong in all sectors, from real estate to luxury, through distribution and industry. Nevertheless, this upswing has been driven in particular by finance and energy/infrastructure, but also by industry and insurance.
2018 was a very active year for the energy, hotel, food, fish, cosmetics, metallurgy, IT, telecoms and retail sectors.
There are various examples of transactions. Motor Oil, the Greek heavyweight oil company which has been diversifying within the energy, the media and the financial sector, embarked upon a barrage of acquisitions, including the majority share capital of Alpha TV Channel for € 33 million, of the Investment Bank of Greece, CPB Asset Management and Laiki Factors and Forfaiters S.A. for € 73,5 million and of the energy trading and retail company, NRG. The banking group of Eurobank acquired Piraeus Bank Bulgaria for € 75 million, while the Mytilineos Group acquired the aluminum company OP.AL.ME SA for € 20 million and the shares that grant it the entire ownership of the natural gas company M & M SA. Motodynamics participated in an increase in the share capital of Lion Rental SA (representative in Greece of the German Sixt car rental company) with € 15 million, acquiring 80.5% of the company, with 19.5% remaining in the Theocharakis family. Briq Properties acquired the Mr & Mrs White Paros hotel on the island of Paros for € 3,5 milion and OPAP acquired the 36,75% of the company TCB Holdings Ltd ("TCB") for € 50 million.
HRADF, the public Hellenic Republic Asset Development Fund, divested its shareholding in the listed telecoms incumbent, Cosmote. A new round of mergers and acquisitions in Greece's important coastal shipping sector is apparently on the horizon, following the acquisition of Hellenic Seaways by the Attica Group for € 152,5 million, which was finalised in the summer of 2018. In the food sector, the Competition Committee approved the acquisition by "DIAMANTIS MASOUTIS SOCIETE ANONYME - SUPER MARKET" of the sole control over the super market chain "PROMITHEFTIKI TROFIMON SA".
What is more, ATE Investment paid €12.5 million for the acquisition of Frigoglass Jebel Ali, a subsidiary of Frigoglass, which is active in the packaging of glassware products. Olympia Group acquired 80% of Metis Cyberspace Technology, a company specializing in the fields of maritime electronic engineering and IoT (Internet Of Things) for the amount of € 4 million. In a further acquisition, Sarantis Group has further strengthened its position on the international business scene, making the third acquisition from the beginning of the year and the 7th overall for the 2017-2018 financial years with the purchase of Ergopack for € 20 million. In September 2018 the MIG shareholders approved the transfer of their entire stake in Hygeia Group (70.38%) to Hellenic Healthcare for € 204,4 million, a company controlled by the fund CVC Capital Partners, which now controls five private hospitals in Greece.
In the Japanese domestic market, investments in venture companies have increased. There has also been an increase in succession-related deals as the result of an owner or CEO selling all or a significant portion of the shares he or she owns in a company due to his or her retirement.
Outbound transactions have taken place across a wide range of industries, in particular, healthcare, financial services, retail and consumer products sectors.
The top 5 target sectors by volume in 2017 were financial and insurance activities, manufacturing, information and communication, construction, and wholesale and retail trade. In the local market, the trend of consolidation in the fiduciary and corporate services sector has continued. Software development also continues to attract significant acquisitions.
Recently there have been some changes within the financial services sector with considerable private equity investment into fiduciary businesses and mergers between insurance companies, constructions companies and financial service providers. Furthermore, applications for sandbox licenses that capture bitcoins and cryptocurrencies have begun to feature on the market.
Dica statistics show that as of 31 December 2018, foreign investment has been particularly strong recently in transport and communications and manufacturing, and that historically it has also been strong in oil and gas.
As we noted in question 2 above, there has also been considerable interest in investing in a distribution business, and the insurance and banking sectors recently.
The government is also in the process of finalising its tenders to upgrade its aged infrastructure, including road, rail and port infrastructure, and this is likely to drive further investment. The Myanmar Ministry of Construction announced on 6 December 2018 that it had shortlisted 10 bids to construct the 20 km Yangon express way, designed to alleviate traffic congestion by linking downtown Yangon to Yangon International Airport and the expressway to Mandalay in the north of the city, under a public-private partnership. The winner would be announced in June 2019.
Entering 2019, TMT, industrials, and the business services sectors have all shown the strongest momentum in the Norwegian M&A market.
In the M&A market, the most active sectors during 2018 were the following: (i) the food industry, with thirteen transactions; (ii) the finance and insurance sector, with seventeen transactions; (iii) the mining sector with fourteen transactions; and (iv) the retail and distribution industry with twelve transactions.
With the current administration’s “Build-Build-Build” program, the construction and infrastructure industry saw significant activity with infrastructure projects amounting to at least P8 trillion in the pipeline. Energy projects and public-private partnerships in the water sector across the country have also seen a lot of spending and provides impetus to the growth of the Philippine economy. Another industry with major activity is the consumer goods market. Century Pacific Foods Corp. acquired the selling rights to manufacture and distribute Hunt’s products from the Universal Robina Corp. The Ayala Group acquired a 49% stake in Zalora Philippines as part of its expansion into e-commerce.
Particular to the energy industry, note-worthy high-value transactions in 2018 consist of the following: $1.9-billion divestment of AES and EGCO’s combined 100% stake in Masinloc to SMC Global Power, AC Energy’s $579-million divestment of its stake in AA Thermal Inc. to Aboitiz Power Corp., Citicore Power’s 100 percent acquisition of Armstrong Asset Management’s 59.9-megawatt solar power plant portfolio in the Philippines and Alsons’ $86-million sale of 50% stake in Alsons Thermal Energy Corp. to Global Business Power. More significant deals are expected this coming this 2019; as in fact, as early as January 2019, AC Energy (of the Ayala group) completed its acquisition of a 51.48% stake in Phinma Energy Corp., to help reach its renewables goals.
Isle of Man
There has been recent activity with acquisitions of fiduciary businesses’, takeovers involving life assurance companies and significant restructuring of banks in the Isle of Man.
Real estate and tourism, technology, energy and pharma.
From what we have seen so far the financial markets, agriculture, industrial goods and retail sectors seem to be particularly active.
By total number of transactions, real estate was responsible for around 50% of all transactions in the 3rd quarter of 2018 and part of the 4th quarter (according to November results).
By value of transactions, real estate and transportation were responsible for around 65% of all transactions in the 3rd quarter of 2018 (but this, of course, does not take into account the big financial sector acquisitions of the first half of 2018).
The decline in the market has led to the retail, property and commodity sectors being depressed. This has given rise to significant restructuring work being undertaken in these sectors.
With respect to M&A activity there has been significant activity in nearly all market sectors when it comes to target companies. On the buyer side, there has been significant activity from venture capital, private equity sponsors as well as industrial buyers. There is also a fairly even mix between Swedish and international buyers.
The sectors with the most listings during 2018 were healthcare, industrials, IT and financials.
The M&A activity was spread across many sectors and industries in 2018, with a particular focus on industrials, chemicals, consumer goods, financial services and TMT. As an example in the consumer goods sector, Nestlé divested its US Confectionery Business to Ferrero for USD 2.8bn. The interest of private equity firms in Swiss targets (mainly Swiss SME's) remained high throughout 2018, partially as a result of the a continuously low interest rate environment.
PPP Projects relating to infrastructure in Thailand have been active, the largest transaction being the financing for Northern Bangkok Monorail Company Limited and Eastern Bangkok Monorail Company Limited in respect of the new mass transit Pink Line and Yellow Line monorail systems for THB 31,680 million (approximately USD 950 million), with facilities of THB 63,360 million (approximately USD 1,900 million) in total. BTS Group Holdings Public Company Limited, Sino-Thai Engineering & Construction Public Company Limited and Ratchaburi Electricity Generating Holding Public Company Limited have jointly invested in these two monorail companies. Our firm was engaged by the Office of the Eastern Economic Corridor of Thailand to advise on the draft law governing PPPs in the EEC area, and is engaged by the State Enterprise Policy Office (SEPO) of the Ministry of Finance to assist in the drafting of the new Public Private Partnership Act in Thailand to replace the Private Investment in State Undertaking Act B.E. 2556 (2013), including its subordinate legislation, regulations and guidelines for PPP mechanisms.
Elsewhere, the e-commerce sector is becoming increasingly active, for example, Grab’s acquisition of Uber in Southeast Asia, including Thailand. The low price of oil has given rise to heightened activity in the energy and renewable energy sectors. Real estate transactions (hotels, multi-use developments etc.) are also commonplace in the current market.
Further, in July 2017, the group business of PTT Public Company Limited, which is one of the largest corporations in Thailand engaged in the oil and gas industry, restructured and spun off its USD 4 billion oil retail business. PTT Public Company Limited also restructured certain petrochemical businesses, its propane business chain and bioplastic business chain, including related service businesses, through transfer to PTT Global Chemical Public Company Limited. Collectively, the total share and asset transfers were valued at THB 26.3 billion (approximately USD 771 million).
The strongest growth in deal announcements in 2018 was from the UAE’s healthcare, materials and consumer and retail sectors. The top-performing sectors for M&A in 2017 in the region included: financial services, with 16 deals at a value of $4.5 billion; industrial and chemicals, with 13 deals at a value of over $3.9 billion; and telecommunications with 7 deals at a value of over $3.2 billion.
In the first quarter of 2018, the top five target sectors in MENA by deal value were oil and gas at $1.4b, chemicals at $0.5b, diversified industrial products at $0.3b, real estate at $0.3b and consumer products at $0.3b.
In the first half of 2018, the energy & power sector was the most attractive target sector in respect of inbound investment in the region with a total of 15 deals at a value of $7.4 billion. In 2018, there was a significant amount of consolidation in the Middle East in the financial services sector – a feature likely to continue into 2019, with further planned mergers in the banking sector having already been announced.
E-commerce, food-tech, cab-aggregation, non-banking finance, education, and health care have been particularly active. Additionally, there has been activity in the warehousing, telecom, manufacturing, energy and natural resources sectors.
3.1 M&A activity during 2018 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. 2019 and 2020 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 during 2018 in the technology space. Foreign investor interest in the technology sector surged markedly during 2018, 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 2019 and 2020 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.
Energy, mining and utilities was the strongest sector for U.S. M&A, driven by a number of mega-deals in the oil & gas space, with aggregate dollar volume of transactions approaching $350 billion. Consistent with most recent years, the technology sector was also very active, with dollar volume of approximately $240 billion.
M&A in the media sector dropped off significantly, largely as a result of the high volume in 2017 caused by a small number of mega-deals that year. Financial services M&A also fell substantially.
Traditionally, the Chinese M&A market is driven by both public and private M&A. According to data from China Venture, in 2018, private equity (PE) and venture capital (VC) transactions accounted for the greater part of the total deal volume, while public M&A transactions account for the majority of the total deal value.
In terms of cross-border transactions, the total deal value of outbound investment dropped a significant 19.7%. On the other hand, the total inbound M&A deal value in 2018 rose by 35.22%.
As for specific industries, TMT and life sciences remained M&A-active industries, while M&A in the manufacturing sector, particularly the automotive industry, appeared to grow more quickly than other sectors.
Renewable energy, oil & gas, healthcare, education, non-banking financial services and FMCG.
Within Guernsey financial services the fiduciary and fund administration sectors have been particularly active in recent years, and there has been and continues to be significant restructuring of banks. We have also seen an increase in mergers in the e-gaming industries and construction and mining.
The real estate, property and construction sectors continue to dominate. According to Thomas Reuters data [source?], the real estate sector had the highest number of deals by volume at 72, and the energy and power sector has the largest aggregate value at US$18.40 billion across 57 deals in 2018.
In addition, a number of M&A deals involve Chinese technology giants such as Alibaba and Baidu, including the US$14 billion equity financing by a consortium led by GIC of a Chinese payment company, Ant Financial, as well as acquisitions of infrastructure companies.
The financial services, technology, media and telecoms (“TMT”) and retail sectors proved to be the most active in 2018, with 2018 largest UK deal being Comcast’s £37 billion offer for Sky. It’s expected that the TMT sector will continue to feature as a significant part of the M&A landscape in 2019.
Although most market sectors are showing signs of growth over the last year, the private equity market in Cyprus and the business services, banking and financial services as well as energy and tourism sectors are all showing significant growth rates.
In 2018, Real Estate remained the most active sector on the M&A market, followed by IT and Technology. Food and Beverages, Pharmaceuticals, and Services were also represented. Nevertheless, certain analysts highlight that Industry and Consumer sectors were dominant, and Financial, Services and IT sectors were also active.
The government sector remains the most active sector in Qatar based on the hydrocarbons industry and major infrastructure projects.
In Slovenia we were last year witnessing the biggest M&A transaction in the financial sector. There were also some noticeable M&A transactions in the industrial, consumer, technology and utilities sectors.