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With 2013 drawing to a close, global M&A activity levels have remained relatively slow with deal volume so far, representing 81% of 2012’s figures and falling 37% below the levels seen in 2007, the last time the major stock indexes traded near 2013 levels.
However, the value of takeovers in Q3 increased by 31% to $836bn from a year earlier with significant investment increases in the telecommunications, technology and real estate sectors. Divestitures have also remained a key driver of M&A activity, making up 33% of disclosed deal value in the first eleven months of 2013.
| So what does 2014 hold in store? |
| Corporate Partners Jeremy Parr and Charlie Jacobs see the following trends for 2014: |
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modest global economic growth will see a significant reduction of stress in the
financial markets |
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underlying constraints and sizeable challenges may still catch the market off-guard including uneven growth in the Eurozone, uncertain fiscal situations and the impact
of rate risk |
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these uncertainties will be outweighed by the record levels of cash on corporate
balance sheets and private equity dry powder spend combined with readily available
debt financing and growing risk appetite. We anticipate gradually increasing M&A activity
as 2014 progresses |
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corporates are largely through the disposal programme of non core assets and cost cutting and are therefore at the “what next” stage |
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we see a round of consolidation happening in the year ahead. This could be one of
two types: |
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merger of equals – typically smaller to mid sized companies bulking up in size, eliminating a set of overheads and redefining their equity story |
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acquisitions – typically companies with cash or access to cash using their
balance sheets to acquire other companies in their sectors, whether financially
stretched or otherwise |
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we predict the busiest four sectors to be Telecoms, Media and Technology, Financial Institutions, Private Equity and Natural Resources |
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with the equity markets picking up, we are likely to see an increase in dual track processes which could result in M&A activity where the IPO option is not pursued. This is particularly so in the private equity sector |
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risk management will still continue to be a core theme within corporate boardrooms and
we anticipate more shareholder activism activity across Europe that will increasingly target larger corporates |
For further information, or to speak to a member of the Linklaters M&A team, please contact Rupert Winlaw on +44 20 7456 3219.
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