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Thoughts:M&A Outlook 2012 Ennovance Capital LLC www.ennovance.com For queries please contact: Investment team: +1 (800) 901-1006 email@example.com
2011 Global Recap • M&A activity exceeded 2010 levels, but 2011 was a relatively erratic year in terms of macroeconomic factors, which contributed to market volatility ▫ European debt crisis and political indecision, Japanese earthquake/tsunami disaster, U.S. political tension, sovereign credit downgrades • 2011 saw overall growth of 9% in Global M&A volume from 2010* ▫ Accelerated activity was seen in the first half of 2011, with a slowdown toward the end of the year which resulted in a moderate year-over-year increase ▫ volume slowed during the last three quarters ▫ Financial sponsor (PE) volume was up 29% from 2010 ▫ Hostile (HF/activist shareholders) volume was down 38% from a year ago*Bloomberg. 2012 Global M&A Outlook.
2011 Global Recap • 2011 saw ongoing growth in in deal volume year-over-year* cross-border deal volume, with a 5.5% increase on the year* • Europe experienced a 10% boost in activity (to $875 billion) on • Large deals experienced a the year in the face of sovereign resurgence in 2011, with 145 debt issues* deals valued over $1 billion in North America* ; however, the • 2011 had a total aggregate M&A number of $10 billion deals deal volume of approximately increased from 14 to 20 in 2011 $2.15 trillion (compare to 2007 peak exceeding $4T)* • The Asia/Pacific region saw • Hostile activity of $168 billion only modest 7.7% growth in deal was down 38% in 2011 vs. a year volume * ago and represented 6% of • China continues to expand overall volume acquisitions with a 9% increase*Bloomberg. 2012 Global M&A Outlook.
Advantages and Obstacles for 2012• The Good: ▫ More cash availability means greater deal potential ▫ Plenty of attractive targets in Europe ▫ Corporate downsizing and breakups continue ▫ Depressed valuations exist Source: Bloomberg
Advantages and Obstacles for 2012• The Bad: European Debt as a Percentage of GDP ▫ Ongoing sovereign debt concerns Greece ▫ Lackluster economic Italy growth perpetuates uncertainty Ireland ▫ U.S. political scene is Portugal tumultuous and unpredictable, election approaching, tax code Germany questions France ▫ New and complex financial regulations UK complicate the process Spain 0% 50% 100% 150% Source: Senate Budget Committee
Private Equity Focus• In America, private equity buyers were the most active acquirers last PE Deal Flow (United States) year, with over $138 billion in deals* ▫ Year over year, this is a more than 40% increase• Private Equity deals are growing in volume* ▫ 2011 saw seven deals announced with valuations over $5 billion, compared to only one in 2010• Plenty of divestiture in 2011 ▫ Six of the top ten PE deals last year were exits**Bloomberg. 2012 Global M&A Outlook. Source: Pitchbook
Private Equity Focus • North America Materials and Resources (particularly the U.S.) 5% remains the top region for private equity capital flow* Financial Energy Services 7% 9% • In the U.S., PE investment Business is most prevalent in the Products and Services business products and 32% services, consumer products and Healthcare services, IT, and 12% healthcare industries** Consumer • Financial Services IT Products and experienced the greatest 13% Services reduction in PE 22% investment in 2011***Bloomberg. **Pitchbook. Private Equity Breakdown 2012. 2012 Global M&A Outlook.
Considerations for Y2012 • The middle market is the dominant segment in private equity ▫ In the first two quarters of 2011, 75% of PE deals were valued under $250 million* ▫ Multi-billion dollar deals receive plenty of press attention, but in reality make up only a small percentage of all transactions ▫ Lending market is OK ($10+ million EBITDA) but cautious with greater financing availability for low margin, cyclical businesses ▫ Within the financial sponsor universe, nearly $500 billion of available capital and funds is beginning to expire • A massive amount of dry powder is available for investment ▫ As of October of last year, private equity firms were sitting on over $937 billion in unused capital which will need to be invested in the next several years** ▫ Some financial sponsors (PE firms) are motivated to invest, instead of returning money to their investors/LPs ▫ Strategic acquirers have been very active in the market since early 2010 as they need acquisitions to supplement organic growth and expand EPS (large cash war-chests prompting more cash deals, moderate stock deals) *Pitchbook **Bloomberg
Considerations for Y2012 • With ongoing economic woes and market uncertainty, choice of industry is crucial to investment success ▫ Industry contraction in sectors such as financial services has left investors desiring dynamic and flexible segments to get involved in • More cross border transactions and emerging market deals ▫ Non-cyclical segments are ripe for investment for the long-term; Natural Resources, Consumer, FIG are hot ▫ Emerging markets transactions represented 26% of global M&A volume in 2011 and cross border transaction accounted for $909 billion or 35% of all M&A activity in 2011 and was up 1% from a year ago
Considerations for Y2012 • The broader chemical industry possesses the diversity and adaptability to present potential viable opportunities in the midst of 2012’s uncertainty ▫ A host of micro-segments within the broader industry each have unique trends and attributes with links to innumerable end user applications ▫ Such a broad range of chemical sectors creates distinctive non- cyclical investment opportunities free of macroeconomic stressors • Prominent end user chemical applications are showing signs of improvement, with plenty of room for near future growth ▫ Automobiles, construction, durable goods • Activist Investors/hostile bids ▫ Trend towards increasing dialogue with shareholders in bid situations ▫ More deals likely to be played out in public
Ennovance Capital: Chemical, chemicalrelated healthcare industry foscused privateequity investor. www.ennovance.com +1(800) 901-1006At Ennovance, we are in one business only — that ofmaking private equity investments and enhancingour portfolio companies’ value. We are not in theinvestment banking, brokerage, or advisorybusinesses; we have no alternative agendas.