Our insights into Global M&A Trends July 2016...
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Our insights into Global M&A Trends July 2016 supplement
Transcript of Our insights into Global M&A Trends July 2016...
Our insights into Global M&A TrendsJuly 2016 supplement
2016: The story so far
Global M&A has stalled in the first half of 2016 with deal values down to their lowest levels in three years. Against abackdrop of geo-political change and uncertainty, many investors and bidders have adopted a more cautiousoutlook to growth. The outcome of the UK's referendum on leaving the European Union has further impactedsentiment, sending shockwaves through the global financial markets. The upcoming US presidential elections willonly serve to heighten the uncertainty and volatility in the markets over the coming months and neither is helpful inan M&A context.
Having said that, we are seeing a strong level of activity in certain regions and sectors. The US continues to be abuoyant market, and Chinese M&A by value has seen its largest half year on record, with the value of outbounddeals in the first half of 2016 almost eclipsing the total in 2015. There has also been increased activity in the TMTsector with many deals among some of the household tech giants now coming to fruition.
Looking to the second half of the year, we expect more strategic opportunities will flow from these tumultuous times,as companies look to capitalise on favourable valuations and currency movements. Recent offers for Poundland,Odeon and UCI Cinemas, and ARM Holdings in the UK already point to acquisitive interest fromoverseas buyers benefitting from Sterling weakness. As ever, we stand ready globally to guide andsupport our clients in this turbulent economic and political environment.
Guy NormanGlobal Head of Corporate
Clifford Chance has been advising on over US $81.8bn of deals in 2016 to date. Some notable deals on which we haveadvised in 2016 include:
n Sainsbury's £1.4bn acquisition of Home Retail Group, the ownerof the Argos and Homebase retail chains – the first UK mega-dealof 2016
n The unsolicited bid for an increased stake in German listedcompany KUKA, made by China's Midea Group – demonstratingthe momentum behind Chinese acquisitions in Europe
n The sale by Actis of Emerging Markets Payments – private equityappetite for M&A continues despite the global political uncertainty
n The ¤230 minority investment in eir, an Irish telecoms provider,by an Asian sovereign wealth fund – TMT continues to be a high-performing sector in the first half of 2016
n Sysco's US $3.1bn acquisition of Brakes – US players continue tooperate on a global scale
n The commodity trader Noble Group's sale of its stake in anagricultural joint venture to China’s state-backed grains traderCOFCO Corporation – evidence of the surge in big-ticket deals ledby cash-rich Asian companies
n The US $575m acquisition by Coca-Cola and Coca-Cola FEMSAof Argentina-based AdeS – the soy-based beverage business ofUnilever Plc – evidence of large corporates still seeking to grow theirmarket share
n The US $786m sale (including net debt) by AEI of Fénix Power toa Colbún-led group – demonstrating M&A activity in the activeenergy, mining and utilities sector
n The purchase by a Dubai-based investor group of a 69 percentstake in Middle East fast-food operator Americana – the MiddleEast's largest M&A deal in 2016 to date
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Our insights on key trends
Chinese outbound
Chinese companies are playing an increasingly active role in global M&A, with many seeking to develop a more global footprint.With the slowdown in the domestic economy in China and overcapacity in some sectors Chinese companies are increasingly
investing overseas. We have seen a focus on European and US targets for Chinese outbound during the first half ofthis year. At the same time, Chinese central government initiatives such as "One Belt, One Road" are spurringinvestments along the Silk Road between China and Europe, particularly in infrastructure. This increase in outboundinvestment has been assisted by accessible financing for corporates from Chinese banks.”
Terence Foo, M&A Partner, Beijing
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Tech M&A
TMT will continue to be a hot sector in the second half of 2016. The start of the year has produced a number of seminaltransactions already, including Microsoft/LinkedIn, Blue Coat/Symantec and IHS/Markit. Looking forward, both theUS tech majors (such as Alphabet, Microsoft and Amazon) and the Chinese giants, which are increasingly looking atinternational expansion, will continue to demonstrate a willingness to make acquisitions. If the current trendcontinues, 2016 will be a stellar year for tech M&A.”
Joachim Fleury, TMT M&A Partner, London
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M&A opportunities in the UK as a result of Brexit
While European M&A by value is down year on year for the first half of 2016 there are opportunities to be found in the marketturmoil. For UK inbound M&A, there are opportunities for bidders - particularly from Asia Pacific - to capitalise on favourable
valuations. Globally private equity firms are sitting on large amounts of available cash, much of which recently raised,and the current climate will suit US$ denominated firms and sovereign wealth funds investing in the UK and Europewho will look to take advantage of depressed currencies. Although the impact of the Brexit referendum on UKfinancial services will play out over time, we may see some divestments of non-core assets.”
“Mark Poulton, Head of Corporate, London
Source: Data taken from mergermarket.com - Global and regional M&A: H1 2016
-27%
Leading sectors by value
The fall in global deal value year on year
H1 global activity levels H1 Value Change in market share from H1 2015
-4%Energy, Mining and Utilities $ 166 bn
10%Industrials and Chemicals $ 244 bn
2%Healthcare $ 164 bn
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Clifford Chance Global M&A ToolkitThe essential interactive resource for anyone involved in M&A transactions. The CliffordChance Global M&A Toolkit comprises a growing collection of web-based transaction toolsand in-depth analysis of the most important market and regulatory developments in M&Aregimes across the globe.
www.cliffordchance.com/GlobalM&AToolkit
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© Clifford Chance, 2016.
10 Upper Bank Street, London, E14 5JJ
www.cliffordchance.com
GlobalGuy NormanT: +44 20 7006 1950E: [email protected]
AfricaSpencer BaylinT: +44 20 7006 1519E: [email protected]
Asia PacificNeeraj BudhwaniT: +852 2826 2428E: [email protected]
AustraliaLance SacksT: +61 28922 8005 E: [email protected]
Central & Eastern EuropeAlex CookT: +420 22255 5212E: [email protected]
ChinaTerence Foo T: +86 106535 2299E: [email protected]
FranceLaurent SchoensteinT: +33 14405 5467E: [email protected]
GermanyThomas KrecekT: +49 697199 1524E: [email protected]
Latin AmericaJavier AmanteguiT: +34 91590 7576E: [email protected]
Middle EastMohammed Al-ShukairyT: +971 43620 638E: [email protected]
North AmericaDavid BrintonT: +1 212 878 8276E: [email protected]
UKMark PoultonT: +44 20 7006 1434E: [email protected]
Global M&A team – Key contacts
Global M&A Trends: Interactive investment flow mapsOur interactive maps show current M&A flows into and out of each major investment region ofthe globe giving you insights into the latest trends in cross-regional M&A. The maps are easyto use, simple and effective. Available through the Global M&A Toolkit at
www.cliffordchance.com/GlobalM&ATrends
