Market Spotlight: The New World of Energy M&A

30 March 2017

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Record dealmaking in the energy sector last year amounted to the second-highest total deal volume (1,141) and the third-highest total deal value (US$512.3bn) in history. This activity was due to a wave of consolidations as oil prices hovered around US$50 a barrel. Meanwhile, 437 transactions in the alternative energy space represented more than a third of the sector’s volume. With a solid year for M&A in the energy sector behind us, dealmakers expect that the 2017 market will continue to be just as robust.
In order to gain an understanding of the opportunities and challenges within the energy sector for 2017, Donnelley Financial Solutions commissioned Mergermarket to interview global dealmakers for their insights.
 
Key findings include:
 
  • More than 80% of respondents believe energy M&A will either increase significantly (20%) or somewhat (64%) over the coming year.
  • A majority of those surveyed (76%) say that North America will experience the most dealmaking (52%) or the second-most dealmaking (24%) in the energy sector.
  • Respondents see consolidation among oil & gas majors and distressed asset purchases by larger companies as the major drivers of energy M&A this year.
  • Companies in the exploration & production segment will see the most M&A activity in the coming 12 months, according to 60% of dealmakers.
For more energy M&A insights, join Donnelley Financial Solutions at the Energy Forum.

Volatility and opportunity: Energy M&A in Asia-Pacific

10 April 2017

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Energy M&A in Asia-Pacific may not have had a record year in 2016, but it was still one for the record books. While dropping 33% in year-on-year value terms, overall announced deals maintained pace with 2015 (196 deals), closing the year with 198 transactions valued at US$77.6bn.
 
Those amounts, despite the decline, were still the second highest annual totals, according to Mergermarket data spanning the past decade. Perhaps more importantly, M&A activity for the year points to the market’s resilience, especially in the oil and gas space where price volatility has plagued national and international oil companies over the past 30 months.
 
Key highlights include:
 
  • Top subsector: Renewable energy transactions—those involving wind, solar, hydro, and geothermal power—accounted for more than half of Asia-Pacific energy M&A transactions in 2016 (52%), increasing from a 44% volume share in 2015.
  • Top Asia-Pacific markets: China maintained its spot as the top market for Asia-Pacific energy M&A in 2016, accounting for 36% of deals and 31% of value. India had the second-largest year-end totals, accounting for 18% of deals and 22% of value, followed by Australia with 11% of deals and 20% of value.
  • Expert Q&A: In an exclusive interview, Eversheds partners Charles Butcher and Jae Lemin share insights on current geopolitical and economic trends shaping Asia-Pacific’s traditional and alternative energy markets.

Asia Pacific Business Complexities Survey 2017: Simplifying Business in a Complex World

19 April 2017

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Mergermarket is pleased to present Asia Pacific Business Complexities Survey 2017, published in association with Baker McKenzie. 57% of business leaders across the Asia Pacific region see the business environment in which they operate becoming increasingly complex. Successfully plotting a way through today’s volatile business environment demands more resilience and ingenuity than ever before. New challenges arise as soon as old ones have subsided, and the ever changing nature of competition means companies must maintain a consistent, innovative edge. But what are the shared complexities that are ratcheting up the pressure on executives in Asia Pacific? Our survey of 150 senior business leaders from across the region seeks to answer several key questions around business complexity, while drawing out specific industry themes. Along with macroeconomic and geopolitical trends, survey respondents identified the need to innovate via new technology (66%), cost pressures or shrinking margins (64%), disruption via technology (62%), as well as compliance or adapting to new or changing regulations (62%) as the top challenges/complexities on the minds of key decision makers across corporate Asia.
 
Key findings include:
 
  • Addressing key complexities: According to 76% of respondents, significant time and resources will be dedicated to focusing on regulatory change, followed by optimizing tax structures (67%) and business systems innovation (67%).
  • Geopolitical turbulence: 79% of respondents said the potential collapse of the Trans-Pacific Partnership would impact their company’s growth prospects, including a third of businesses predicting significant fallout.
  • Technological disruption: 52% said technological disruption in the financial institutions sector would be very likely in the next two years, along with 45% who said such disruption is likely.
  • Spotlight on sectors: Energy, mining and infrastructure and healthcare companies mainly face compliance/regulatory and environmental issues, ITC and financial institutions face innovation and cybersecurity complexities, and cost pressures created the most challenges in the consumer goods and manufacturing sectors.

Monthly M&A Insider – April 2017

25 April 2017

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Global M&A value for Q1 2017 rose 8.9% versus the same period last year thanks to a number of announced megadeals. Year-over-year deal volume fell by 772 deals, however, amid concerns of geopolitical uncertainty among smaller buyers. North America held pole position as the leading destination for acquirers, witnessing a 24.5% increase in value. North America, Africa and the Middle East were the only regions to see deal values increase versus last year’s Q1 activity. Most global activity in Q1 occurred in the Energy, Mining & Utilities sector, a trend driven mainly by reorganizations by midstream companies.
 
Highlights from this report include:
 
  • The first quarter of 2017 had 3,554 global deals valued as US$678.5bn, while Q1’16 had 4,326 deals worth US$622.9bn.
  • Energy, Mining & Utilities tallied 293 deals worth US$163.8bn, up 90% in value when compared to Q1 of last year.
  • Private equity buyouts mirrored the overall M&A trend, seeing deal values increase 9.2% to US$78.7bn while deal volume declined from 680 to 576 deals.
 

Market Spotlight: Corporate Governance

02 May 2017

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Activist campaigns remained steady throughout 2016, reaching the third-highest annual count since 2009. While the year’s campaigns fell short of 2015’s record-breaking totals, the number of companies facing demands continued at a steady pace, notably among European and Asian companies. In the US, 456 activist demands were made on businesses, up from the 418 made in 2015. In Europe, there have been several high-profile examples of activists obtaining boardroom seats — including companies within the FTSE 100. Finally, in Japan, a surge in activity resulted from Prime Minister Shinzo Abe’s support for shareholder activism as part of a plan to revive that country’s economy.
 
In order to understand 2017’s latest trends in corporate governance, shareholder activism, and M&A, Donnelley Financial Solutions commissioned Mergermarket to interview global dealmakers for their views.
 
Key findings include:
 
  • 72% of participants predict that activist-driven M&A will increase in the coming 12 months (32% believe significantly so).
  • The main drivers of increased activist activity are expected to be pressure to merge with competitors, pressure to spend cash on acquisitions, and pressure to do alternative deal types.
  • Financial services is the sector cited most likely to receive the highest amount of activist-driven M&A activity in the next 12 months.

Navigating The Modern Deal Process: Targeting

24 May 2017

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The growing availability of data, increasing globalization, and the introduction of new technologies have significantly impacted the sourcing methods and strategies of sell-side targeting. This evolution has given rise to more targeted auctions, more unsolicited bids, and more potential regulatory hurdles to overcome.
 
To better understand how the deal cycle continues to change for sell-side dealmakers, Donnelley Financial Solutions, in conjunction with Mergermarket, presents Navigating The Modern Deal Process: Targeting, the first of a three-part series.
 
Key findings include:
 
  • Some 82% of respondents said that their use of the negotiated sales process had increased in the past five years.
  • Nearly half of respondents (46%) say that the average length of time it took between deciding to sell an asset and settling on a buyer increased over the past five years.
  • Face-to-face meetings have become less frequent according to 52% of respondents, who cite the increased ease of communication and international dealmaking made possible by tools such as virtual data rooms, deal marketing solutions, and video conferencing.

Monthly M&A Insider – May 2017

25 May 2017

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The month of April had 1,026 deals worldwide totaling US$229.9bn, up 3.8% in value despite 530 fewer deals when compared to April 2016. The Consumer and the Pharma, Medical & Biotech sectors led the month in terms of acquisitions. LVMH’s US$13.2bn buyout of minority investors in fashion designer Christian Dior, as well as the US$4.6bn purchase of Belle International Holdings by a Chinese private equity consortium, helped to drive Consumer activity. Meanwhile, megadeals in the Pharma, Medical & Biotech sector, including US-based Becton Dickinson’s US$23.4bn purchase of rival medical supply manufacturer CR Bard, helped the sector reach a total of 73 deals worth US$46.6bn.
 
Highlights from this report include:
 
  • The Consumer sector saw 121 deals worth US$47.2bn, up 147.6% in value compared to 192 deals worth US$19.1bn in April 2016.
  • Cross-border deal value increased 42.7% for the month to US$85.4bn, representing more than 41% of all M&A value.
  • There were 179 private equity deals globally for the month worth US$34.3bn, 89 fewer deals and 17% less value when compared to the same period last year.

Market Spotlight: Megadeals

31 May 2017

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Megadeals dominated 2015 when 67 transactions over US$10bn combined for a total value of US$1.8tn. This left expectations high for 2016, which delivered 31 blockbuster deals worth US$1.7tn in its first three quarters alone. Moving into 2017, there have already been nine recorded megadeals over US$10bn, up from eight in Q1 2016. Despite this achievement, the overall dealmaking climate is cautious amid political uncertainty and high valuations, leaving many divided on whether the trend toward megadeals will continue much further.
 
In order to find out the latest trends in megadeal activity, Donnelley Financial Solutions commissioned Mergermarket to interview global dealmakers for their insights.
 
Key findings include:
 
  • Some 56% of respondents predict that the energy sector will see the most megadeal activity in the next 12 months.
  • The United States will experience the most megadeal activity in the year ahead, according to 44% of respondents.
  • The majority of respondents (76%) believe that megadeal activity will either decrease (36%) or remain the same (40%) in 2017.

Software M&A Frenzy: Searching for the competitive edge

07 June 2017

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Last year set a record for the highest number of software M&A transactions on Mergermarket record, and the momentum behind the acquisitions appears far from over. As corporations and private equity (PE) firms have accumulated vast amounts of cash, they plan to target firms specializing in industry-specific software, business intelligence, and cloud computing. These buyers are looking more closely at firms with an emphasis on finding the right target instead of price. This translates to deals moving faster than ever, with limited time for buyers to conduct due diligence and detect potential post-deal issues involving cybersecurity.

To better understand the main drivers and strategies behind this activity, West Monroe commissioned Mergermarket to survey senior global executives for their insights.

Key findings of this report include:

  • When combined, the majority (57%) of corporate and PE respondents expect to execute three to four acquisitions over the next two years.
  • More respondents say the success of a software acquisition primarily depends on technical and operational factors, rather than price.
  • A majority of respondents say they’ve walked away from a software deal in the past, with most corporates (23%) citing cybersecurity concerns as the biggest deal-breaker and almost a quarter of PE firms (22%) citing compliance issues.
  • Compared to data in last year’s report from West Monroe and Mergermarket (Testing the Defenses: Cybersecurity due diligence in M&A), cybersecurity diligence concerns have grown with 16% of respondents reporting being somewhat dissatisfied with cybersecurity due diligence (up from 3% a year ago).

For more on how to navigate your next software acquisition, check out West Monroe’s recent white paper “Are You a Savvy Software Investor?

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