The European Wave of Mergers Is Not Losing Power
DELOITTE CONSULTANTA S.R.L. - 25 June 2008
Current M&A study reveals: despite the financial market crisis, European Executives remain upbeat about their M&A plans. Western and Eastern Europe attract attention of both strategic and financial investors.
Bucharest, June 25 – The economic environment has deteriorated over the course of last year, but that is not deterring M&A decision makers from retaining a positive outlook on activity for the next 18 months, according to the Deloitte study “Staying on course – M&A in Europe”.
The publication, a joint effort of the M&A practices in Belgium, Central Europe, Denmark, Germany and the Netherlands, sheds light on sentiment change during the development of the financial market crisis as well as on the most attractive regions for acquisition activity within Europe. It also highlights the drivers of M&A decisions. According to the Deloitte study, Western and Central Europe hold top positions in the regional focus of respondents - 75% respectively. 58% of survey participants ranked these regions as top choice investment locations. Generally, Europe is preferred, although the emerging Asian markets draw investors' attention as well.
Central European respondents in particular do not appear to have any plans for M&A activity further afield than within Central Europe and Western Europe. Asia, North America, Latin America and the Middle East all ranked of little or no importance to them. “Historically, companies in emerging markets have often been prey to takeover bids from businesses in the West.
Today, supported by strong economic growth and ambitious management, it is also companies from emerging nations that are increasingly looking across borders for assets,” says Garret Byrne, M&A Transaction Services Leader for Deloitte Central Europe. Antonis Ioannides, Partner M&A Transaction Services with Deloitte Romania, added input on the local market: "Romania not only has not been affected by the recent global credit crisis, but has accelerated in certain areas, in the past few months. Obviously, there is some caution in respect with the real estate sector. However, on other sectors there is an intensified transactional activity.”
Romania, he continued, is the most exciting market in the area at the moment, something the firm does not anticipate to change over the next few years. “The most important M&A deals happen in energy and resources, TMT (telecom, media, technology) and FSI (the financial services industry)," he concluded. When looking at the M&A activities planned and expected over the next 18 months in Europe, Deloitte reports that both businesses and private equity investors intend to expand.
Mergers and acquisitions are a tool helping companies assure long-term success in global markets – accordingly, the current drivers for M&A are strategic transactions with the key objective usually being to improve the company's competitive position.
Investments in Europe are most popular
Europe is the preferred region for M&A activities – financial investors mainly focus on Western Europe, but they also show strong interest in Central European investment opportunities. In this connection, 90 percent of West European companies are also active in West European markets, but Central Europe is building an equally prominent position. Although cross-border investments are a general trend, Central Europeans are more internationally-oriented than their West European counterparts.
A significant proportion of European M&A was undertaken in the consumer business and manufacturing sectors, followed by technology, media and telecommunications in Western Europe and energy and resources in Central Europe. “Consumer Business and Energy & Resources are on a strong upward trend for M&A in Central Europe. The trend is for more and more cross-border work driven by the emergence of the bigger foreign retailers such as Tescos. These trends then drive consolidation on the supplier side as they merge to generate economies of scale in supplying such large retailers. E&R is one of the few sectors in Central Europe generating larger transactions,” comments Byrne.
Success factors
The best practices at the transaction implementation stage are undisputedly those set up by private equity companies - they plan the post-merger phase effectively and define long-term goals and success criteria for their M&A. At the post-merger phase, successful companies typically plan and implement strategies that take account of cultural factors and have consistent HR strategies.
About the study: In compiling the study, Deloitte conducted a survey among M&A contacts of Deloitte SE partners (from Belgium, Central Europe, Denmark, Germany and the Netherlands) in spring 2008. To set out the current issues faced by the M&A marketplace 120 high-level executives, both at corporations and private equity houses, were alerted to the survey. Of that, 60 completed a detailed online questionnaire about their M&A plans, objectives and success factors. Comparing the results of the recent survey with those of Deloitte surveys from last year, it also looks at how transactions are climbing up on the agenda of European decision makers.
About Deloitte
Deloitte provides audit, tax, consulting, and financial advisory services to public and private clients spanning multiple industries. With a globally connected network of member firms in 140 countries, Deloitte brings world-class capabilities and deep local expertise to help clients succeed wherever they operate. Deloitte's 165,000 professionals are committed to becoming the standard of excellence. Deloitte's professionals are unified by a collaborative culture that fosters integrity, outstanding value to markets and clients, commitment to each other, and strength from cultural diversity. They enjoy an environment of continuous learning, challenging experiences, and enriching career opportunities. Deloitte's professionals are dedicated to strengthening corporate responsibility, building public trust, and making a positive impact in their communities. “Deloitte” is the brand under which tens of thousands of dedicated professionals in independent firms throughout the world collaborate to provide audit, consulting, financial advisory, risk management, and tax services to selected clients. These firms are members of Deloitte Touche Tohmatsu, a Swiss Verein (“DTT”). Each member firm provides services in a particular geographic area and is subject to the laws and professional regulations of the particular country or countries in which it operates. DTT helps coordinate the activities of the member firms but does not itself provide services to clients. DTT and the member firms are separate and distinct legal entities, which cannot obligate the other entities. DTT and each DTT member firm are only liable for their own acts or omissions, and not those of each other. Each DTT member firm is structured differently in accordance with national laws, regulations, customary practice, and other factors, and may secure the provision of professional services in their territories through subsidiaries, affiliates, and/or other entities.
About Deloitte Central Europe
Deloitte Central Europe is a regional organization of entities organized under the umbrella of Deloitte Central Europe Holdings Limited, the member firm in Central Europe of Deloitte Touche Tohmatsu. Services are provided by the subsidiaries and affiliates of Deloitte Central Europe Holdings Limited, which are separate and independent legal entities. The subsidiaries and affiliates of Deloitte Central Europe Holdings Limited are among the region’s leading professional services firms, providing services through more than 4000 people in more than 30 offices in 17 countries.
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