7th Annual Brunswick Group M&A Survey

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The 7th Annual Brunswick Group M&A Survey polled over 160 top advisors from North America, Europe and Greater China on their views about the current deal landscape and trends.
This year’s survey finds:
Healthcare, Technology & Telecoms Expected to Lead Deal Activity in North America
Greater Confidence among Dealmakers in Europe and Greater China for 2014
Deal Interference by Shareholder Activists Expected to Increase

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7th Annual Brunswick Group M&A Survey

  1. 1. M&A Survey 7th Annual
  2. 2. FOR THE SEVENTH CONSECUTIVE YEAR, the Brunswick Group M&A Survey has polled leading deal practitioners on their outlook for the coming year’s deal landscape and trends.This is the second year soliciting European advisors’views and the third with insights from Greater China.Over 160 top deal bankers and lawyers participated in this year’s global survey: 92 from North America, 33 from Europe and 43 from Greater China. EXECUTIVE SUMMARY • Confidence in the global M&A landscape remains high with North America-based, Greater China-based and Europe-based advisors expecting deal activity in their local region to increase in 2014 (83%, 74% and 72% respectively). Confidence among dealmakers in Europe and Greater China has improved since last year, up by 11% and 7% respectively. • Global M&A activity is also predicted to increase over 2013 by North American and Greater China based advisors (78% and 77% respectively). • North American and European advisors see this uptick being driven by strong CEO and Board confidence (63% and 75%, respectively, see this as the key driver), while Greater China-based advisors see growing appetite for foreign expansion among privately-owned Chinese companies (53%) and Chinese State Owned Enterprises (50%) as the top factors.
  3. 3. The results of the survey are released ahead of the 26th Annual Tulane University Law School Corporate Law Institute, the leading M&A conference in the U.S. that draws lawyers, bankers, Delaware judges, proxy solicitors and other members of the deal community. For further information: http://www.brunswickgroup.com/publications/surveys/ • In terms of the direction of deal activity, North American advisors expect inbound investment to primarily come fromAsia (58%) and Europe (36%,up from 23% last year).Meanwhile,European advisors are anticipating an in-flow of M&A investment from NorthAmerica (72%, up from 61% last year), while China advisors expect acquisitions by Chinese companies to be targeted towards Europe (46%) & Africa (27%). • The rise of shareholder activism is set to continue, with two thirds of advisors or more expecting to see an increase in the level of deal interference by shareholder activists in 2014 (88% in Europe, 69% in NorthAmerica and 64% in Greater China).Advisors in Europe and North America predict that shareholder activists are most likely to demand spinoffs, sales or divestitures (52% and 39% respectively). • Almost all advisors in NorthAmerica, Greater China and Europe expect anti-trust scrutiny for cross border deals to stay the same or increase across all regions tested in 2014.
  4. 4. 1A Compared to 2013, do you expect the level of North American M&A will increase, decrease or stay at the same level in 2014? Confidence in deal activity remains high, almost all of those surveyed believe North American M&A volume will either increase (83%) or stay the same (15%) this year. 201220112010 2013 2014 DecreaseStay the sameIncrease 2% 10% 42% 48% 3% 97% 0 15% 83% 8% 22% 78% 92% 00
  5. 5. 1B Compared to 2013, do you expect the level of Greater China M&A will increase, decrease or stay at the same level in 2014? Nearly three quaters (74%) of advisors survyed in China think M&A in Greater China will increase in 2014, up from 67% in 2013. 76% 20% 4% 67% 30% 4% 74% 26% 0 2012 2013 2014 DecreaseStay the sameIncrease
  6. 6. 1C Compared to 2013, do you expect the level of European M&A will increase, decrease or stay at the same level in 2014? Almost three quarters (72%) of Europe-based advisors expect the level of European M&A to increase in 2014.This percentage has increased from 61% in 2013. 2013 2014 61% 33% 6% 72% 24% 3% DecreaseStay the sameIncrease
  7. 7. 2A Compared to 2013, do you expect the level of global M&A will increase, decrease or stay at the same level in 2014? Nearly four in five (78%) North America-based advisors expect to see increased global M&A activity in 2014.This is fairly consistent with 2013 views (82%). 2012 2013 2014 DecreaseStay the sameIncrease 78% 82% 49% 28% 23% 15% 19% 4% 3%
  8. 8. 2B Compared to 2013, do you expect the level of global M&A will increase, decrease or stay at the same level in 2014? Three in four (77%) Greater China-based advisors expect to see an increase in the level of global activity in 2014, only 3% expect a global decline. 2012 2013 2014 DecreaseStay the sameIncrease 77% 74% 56% 36% 22% 20% 3% 4% 4%
  9. 9. 3 Compared to 2013, do you think the level of mega-deals and leveraged buyouts will increase, decrease or stay at the same level in 2014? Increase Stay the same 20% 71% Decrease 8% Seven in ten (71%) NorthAmerican advisors expect to see an uptick in the level of mega-deals and leveraged buyouts in 2014, down from 89% in 2013.
  10. 10. 4 Compared to 2013, do you expect the level of North American corporate spinoffs and divestitures will increase, decrease or stay at the same level in 2014? Three in five North American advisors (60%) see corporate spinoffs and divestitures in North America increasing in 2014, while 36% see the level staying the same and 5% see a decrease in 2014. 5% Decrease 36% Stay the same 60% Increase
  11. 11. 5A North American dealmakers predict a mergers and acquisitions surge this year, propelled mainly by greater confidence among CEOs and board members (63%). Shareholder activism and pressure from investors (47%) and greater availability of credit and the low interest rate environment (46%) are also thought to be key factors. What are the key factors that will drive M&A in 2014? 46%45%63% 16%6%16% 63%64%61% CEO / Board confidence 47%44%28% Shareholder activism / pressure from investors Availability of credit and low interest rate environment 40%53%70% Improving economy 25%30%20% Equity market rebound in U.S. Cost cutting / synergies 32%N/AN/AStrategic repositioning (new lines of business, geographic expansion) 4%8%0 Other 22%36%63% More cash on balance sheets
  12. 12. 5B Greater China-based deal advisors see the primary drivers of increased M&A in 2014 as a growing appetite among privately-owned Chinese companies (53%) and Chinese State Owned Enterprises (50%) for foreign expansion. What are the key factors that will drive M&A in 2014? 17%44%28% Shareholder activism / pressure from investors 20%45%63% Availability of credit and low interest rate environment 23%45%63% Opportunities in strugglingWestern economies 50%45%63% Growing appetite among Chinese SOEs for outward expansion 53%38%84% Growing appetite among privately-owned Chinese companies for outward expansion 23%53%70% Improving economy 10%30%20% Equity market rebound in U.S. 3%6%16% Cost cutting / synergies 23%N/AN/AStrategic repositioning (new lines of business, geographic expansion) 13%8%0 Other 27%36%63% More cash on balance sheets 30%64%61% CEO / Board confidence
  13. 13. 5C What are the key factors that will drive M&A in 2014? Increased confidence among CEOs and board members (75%) is seen as the primary driver of increased European M&A in 2014 followed by the improving economy (54%) and greater availability of credit and the low interest rate environment (50%). 50%56% 7%50% 75%72% CEO / Board confidence 25%28% Shareholder activism / pressure from investors Availability of credit and low interest rate environment 54%17% 11%30% Equity market rebound in U.S. Cost cutting / synergies 29%N/AStrategic repositioning (new lines of business, geographic expansion) 017% 27%39% More cash on balance sheets Improving economy Other
  14. 14. 6A What type of deals do you expect to drive the North American M&A market in 2014? Domestic transactions among strategic buyers (72%) are expected to make up the majority of the NorthAmerican M&A market in 2014. – foreign acquirers into the U.S. Inbound Outbound – U.S. acquirers outside of the U.S. 6% 6% Domestic transactions among strategic buyers Private equity 72% 15%
  15. 15. 6B What type of deals do you expect to drive the Greater China M&A market in 2014? Nearly three in four (73%) China-based advisors expect the Greater China deal market to be driven by Chinese companies pursuing foreign opportunities, while domestic transactions (10%) and private equities (10%) are expected to play a smaller role in 2014. – foreign acquirers into the China Inbound Outbound – Chinese acquirers outside of the China 73%3% Domestic transactions among strategic buyers 10% Private equity 10% Other 3%
  16. 16. 6C What type of deals do you expect to drive the European M&A market in 2014? More than half (56%) of Europe-based advisors surveyed believe the European M&A market will be comprised of foreign acquirers pursuing opportunities in Europe, while 19% expect private equity and 15% see European companies pursing foreign opportunities to be key factors. – foreign acquirers into the U.S. Inbound Outbound – U.S. acquirers outside of the U.S. 15%56% Domestic transactions among strategic buyers Private equity 11% 19%
  17. 17. 7A What sectors do you anticipate are the most ripe for consolidation in 2014? North American deal makers predict the most active sectors for consolidation in 2014 will be Healthcare (73%) andTechnology and telecoms (70%) Automotive 14% 1% Consumer Goods / Retail 31% 41% Energy 10% 43% Financial Services 10% 17% Healthcare 14% 73% Industry / Engineering 5% 11% Media 0 15% Metals / Mining 2% 11% Utilities 2% 4% Technology & Telecoms 22% 70% Other 2% 1% 2013 2014
  18. 18. 7B What sectors do you anticipate are the most ripe for consolidation in 2014? TheTechnology and telecoms (67%) and Healthcare (57%) sectors are thought to be most ripe for consolidation in Greater China in 2014. Automotive 0 10% Consumer Goods / Retail 16% 33% Energy 8% 20% Financial Services 4% 43% Healthcare 0 57% Industry / Engineering 0 20% Media 0 13% Metals / Mining 0 20% Utilities 0 0 Technology & Telecoms 20% 67% Other 8% 0 2013 2014
  19. 19. 7C What sectors do you anticipate are the most ripe for consolidation in 2014? Europe-based advisors believe the Technology and telecoms sector (60%) is ripest for consolidation in 2014, followed by the financial services (40%) sector. Automotive 12% 4% Consumer Goods / Retail 0 36% Energy 24% 36% Financial Services 24% 40% Healthcare 14% 36% Industry / Engineering 18% 28% Media 0 12% Metals / Mining 6% 12% Utilities 6% 28% Technology & Telecoms 22% 60% Other 0 4% 2013 2014
  20. 20. 8 What sectors do you anticipate will receive the most antitrust scrutiny related to merger activity in 2014? The sectors North American advisors anticipate will receive the most antitrust scrutiny related to merger activity in 2014 areTechnology and telecoms (77%) and Media (61%). 28% Consumer Goods / Retail 28% Energy 61% Media 9% Metals / Mining 77% Technology &Telecoms 39% Healthcare
  21. 21. 9A What region do you anticipate foreign acquirers into NorthAmerica coming from in 2014? Asia is expected to continue to be the principle foreign buyer in North America (58%). North American advisors expect more European buyers to be active in 2014 (36%, up from 23%), while only 3% expect buyers to be from Latin America (down from 11% in 2013) A sia 58% Au strala sia 1% M iddleE ast 1% E urope 36% L atinA m erica 3%
  22. 22. 9B What region do you anticipate the most foreign acquirers into Greater China coming from in 2014? For Greater China based advisors, NorthAmerica is expected to remain the top buyer in Greater China (57%). More respondents expect foreign acquirers to come from Europe and (21%, up from 12%) and fewer buyers fromAustralasia (11%, down from 19%) in 2014. Au stralas ia 11% Nort h America 57% Lati n Ameri ca 4% Afri ca 4% Mid dleEast 4% Euro pe 21%
  23. 23. 9C What region do you anticipate the most foreign acquirers into Europe coming from in 2014? Most Europe-based advisors believe foreign acquirers are most likely to come from North America (72%) in 2014, an uptick from 61% in 2013. Nort h America 72% A sia 28%
  24. 24. 10 Compared to 2013, do you expect the number of North American companies re-domiciling to other countries as part of cross-border transactions will increase, decrease or stay the same in 2014? North American advisors say the number of North American companies re-domiciling to other countries as part of cross-border transactions will increase (45%) or stay the same (41%) in 2014. 13% Decrease 41% Stay the same 45% Increase
  25. 25. 11 Compared to 2013, do you expect the level of public deals in Germany to: Two in three (64%) Europe-based advisors expect the level of public deals in Germany to stay the same as it was in 2013. 4% Decrease 64% Stay the same 32% Increase
  26. 26. 12 What impact, if any, do you think the political tension in the Asia region (e.g. between China and Japan) will have on intra-Asian deal activity in 2014? Political tension in the Asia region is not expected to have a significant impact on intra-Asian deal activity in 2014,with half (46%) of Greater China advisors predicting a minor reduction in deal activity and almost as many (43%) anticipating no impact at all. 11% 64% 43% Major reduction in deal activity Minor reduction in deal activity None
  27. 27. 13A In 2014, do you expect the level of antitrust scrutiny for cross-border deals in the following regions to increase, decrease, or stay the same? Almost all respondents in North America expect anti-trust scrutiny for cross border deals to stay the same or increase across all regions tested. More than twice as many expect the level of antitrust scrutiny for cross-border deals in NorthAmerica and Europe to stay the same (NA: 66%, EU: 71%) than think it will increase (NA: 31%, EU: 29%) in 2014. Advisors are divided on whether scrutiny will increase (50%) or stay the same (50%) in Greater China. DecreaseIncreaseStay the same 3% ChinaEuropeNorth America 66% 31% 71% 29% 50% 50%
  28. 28. 13B In 2014, do you expect the level of antitrust scrutiny for cross-border deals to increase/ decrease/ stay the same Almost all respondents in Greater China expect anti-trust scrutiny for cross border deals to stay the same or increase across all regions tested. Antitrust scrutiny for cross border deals is expected to increase in Greater China (67%) and North America (57%). DecreaseIncreaseStay the same 3% ChinaEurope 10% North America 40% 57% 57% 43% 23% 67%
  29. 29. 13C In 2014, do you expect the level of antitrust scrutiny for cross-border deals to increase/ decrease/ stay the same European-based advisors tend to think anti-trust scrutiny for cross border deals is most likely to stay at the same level in 2014 in the regions tested, especially in North America (84%). 4% 4% DecreaseIncreaseStay the same ChinaEuropeNorth America 84% 16% 64% 32% 56% 40%
  30. 30. 14A Do you expect to see more deals using: For the first time in five years,advisors in NorthAmerica expect to see a decrease in the number of deals done with all cash (25%). More than half of respondents (58%) predict that deals will use a mix of cash and stock although there is also an expected uptick in the number using all stock (17%). 17% 3% 35% 63% 27% 69% 5% 25% 58% 38% 66% 28% 6% 57% 5% 201220112010 2013 2014 All cash A mix of cash and stockAll stock
  31. 31. 14B Do you expect to see more deals using: There has been a reversal in views on the structure of funding for deals in 2014 with almost two in three (63%) advisors in Greater China believing they will see more deals using a mix of cash and stock, than using all cash (37%). All cash A mix of cash and stockAll stock 2013 2014 42% 58% 0 63% 37% 0
  32. 32. 14C Do you expect to see more deals using: Advisors in Europe expect to see a decrease in the number of deals being done with all cash (38%) and growth in deals using a mix of cash and stock (58%) or all stock (4%). All cash A mix of cash and stockAll stock 2013 2014 22% 78% 0 58% 38% 4%
  33. 33. 15A Deal interference by shareholder activists is a trend expected to continue in 2014 with almost all North American advisors predicting that shareholder activism will increase (69%) or stay the same (27%). Given the rise in activist attacks on deals in 2013,do you expect the level of deal interference by shareholder activists to increase, decrease, or stay the same in 2014? Decrease 4% Stay the same 27% Increase 69%
  34. 34. 15B Nearly two in three (64%) Greater China advisors expect deal interference by shareholder activists to increase in 2014. Only 4% believe shareholder activism will decrease. Given the rise in activist attacks on deals in 2013,do you expect the level of deal interference by shareholder activists to increase, decrease, or stay the same in 2014? Decrease 4% Stay the same 32% Increase 64%
  35. 35. 15C The vast majority of advisors based in Europe anticipate an increase (88%) in deal interference by shareholder activists in 2014.The remainder (13%) think the level of activist attacks on deals will stay at the same level as 2013. Given the rise in activist attacks on deals in 2013,do you expect the level of deal interference by shareholder activists to increase, decrease, or stay the same in 2014? Decrease 0 Stay the same 13% Increase 86%
  36. 36. 16A Compared to 2013, do you expect the number of companies to adopt a poison pill as a defense tool will increase, decrease or stay the same in 2014? One in five (21%) NorthAmerican advisors predict the number of companies adopting a poison pill as a defensive tactic will increase in 2014. Decrease 8% Increase 71% Stay the same 21%
  37. 37. 16B Compared to 2013, do you expect the number of companies to adopt a poison pill as a defense tool will increase, decrease or stay the same in 2014? Almost four in five (78%) Europe-based advisors believe the number of companies that adopt a poison pill as a defence tactic will stay the same in 2014, while 13% think the number will increase. Decrease 9% Increase 78% Stay the same 13%
  38. 38. 17A What do you expect will be the most recurring demand among shareholder activists in 2014? North American advisors think shareholder activists are most likely to demand spinoffs, sales or divestitures (39%) in 2014. 39% 32% 27% 3% Board representation Spinoffs, sales or divestitures Mergers and acquisitions Share buybacks or dividends
  39. 39. 17B What do you expect will be the most recurring demand among shareholder activists in 2014? Half (52%) of Europe-based advisors think shareholder activists will demand spinoffs, sales or divestitures in 2014. 52% 30% 9% Spinoffs, sales or divestitures Mergers and acquisitions 9% Board representation Share buybacks or dividends
  40. 40. 18 Do you expect companies will agree to put shareholder activists on their boards in order to avoid public fights in the year ahead? Nine in ten (91%) North American advisors believe 2014 will mark the year that companies agree to put shareholder activists on their boards to avoid public fights. Yes No 91% 9%
  41. 41. 19 What region do you anticipate Greater China acquirers will be buying into most during 2014? Greater China advisors surveyed believe Greater China acquirers are most likely to invest in Europe (46%) or Africa (27%) in 2014. Aust ralasia 15% Lat inAm erica 4% Afric a 27% Mid dleEast 8%Europ e 46%
  42. 42. 20 When you are representing a seller of an asset, are there some countries from which you are more nervous about the buyer?Which ones? Greater China deal advisors are most nervous about buyers located in Latin America (75%) and Mainland China (67%). Other (outside Asia) 8% Indonesia 38% Australasia 50% North America 33% Latin America 75% Malaysia 13% Middle East 17% Europe 8% 4%Hong Kong Mainland China 67% 0Singapore 0Japan 0Other (Asia) 0Africa 0Russia 0India
  43. 43. ABOUT BRUNSWICK GROUP LLC Brunswick Group is a private partnership with a growing team of more than 700 people, including over 100 partners around the world.The firm has grown organically since it was established in 1987 and currently has 22 wholly owned offices in 13 countries. Brunswick is the global leader in financial and corporate communications, and provides senior counsel to clients around the globe on critical issues that affect reputation, valuation and business success. The firm's service offer comprises corporate and financial communications, investor relations, internal communications and perception research. Brunswick operates offices inAbu Dhabi, Beijing, Berlin, Brussels, Dallas, Dubai, Frankfurt, Hong Kong, Johannesburg, London, Milan, Munich, NewYork, Paris, Rome, San Francisco, Shanghai, Singapore, Stockholm, Sao Paulo,Vienna andWashington DC.
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