Leading M&A practitioners are the most bullish on deal activity since the collapse of the last buyout boom with 97 per cent of North American advisers forecasting an uptick from 2012.
The primary driver of this optimism, the strongest in the six years this survey has been conducted, is greater confidence among CEOs and in the board room (64 per cent), followed by optimism of a burgeoning economy (53 per cent) and the ready availability of inexpensive debt (45 per cent).
The 6th Annual Brunswick Group M&A Survey polled over 100 top advisers from North America, Greater China, and Europe. Results were released ahead of the 25th Annual Tulane University Law School Corporate Law Institute conference, an annual gathering of the deal community that draws lawyers, bankers, Delaware judges and other market participants.
Responding to views on the current deal landscape and trends, advisers from these three regions uniformly see strong deal prospects in 2013. However, Greater China and Europe-based advisers have somewhat more tempered views on M&A, both within their regions and globally, than those in North America. Two thirds (67 per cent) of advisers surveyed in Greater China predict an uptick in domestic M&A while three fourths (74 per cent) expect M&A on a global scale to increase. Among European-based advisers (included in this survey for the first time), three in five (61 per cent) predict an increase in European M&A activity, while nine in ten (88 per cent) see global M&A rising.
“Cheap money, a buoyant stock market and rising CEO and board confidence are ideal ingredients for a significant boost in M&A activity in 2013,” says Steve Lipin, senior partner, Brunswick Group. “If the deal community is right, it is le bon temps rouler for the deal business.”
For the first time, North American advisers see consumer goods (31 per cent) as the busiest sector for consolidation, ahead of long time staple technology and telecoms (22 per cent) and newcomer energy (15 per cent). After several years, healthcare has dropped out of the top three with only (14 per cent) of advisers seeing it as active for deal activity (down from 21 per cent in last year’s survey of North American advisers). Chinese advisers see manufacturing (20 per cent) and technology (20 per cent) as the most popular sectors, while Europe-based respondents see financial services (24 per cent), energy (24 per cent) and industry/engineering (18 per cent) as the ripest for consolidation in 2013.
Nearly three-quarters (71 per cent) of North American advisers see domestic strategic plays as dominating the deal market versus cross-border engagement. In terms of inbound activity, 61 per cent of North American advisers believe the most inbound deals will originate in Greater China (a decline from 2012 which saw Greater China peak at 78 per cent), compared to 23 per cent for Europe and 11 per cent for Latin America, a notable increase from four per cent last year. Three in five (61 per cent) North American advisers see corporate spinoffs and divestitures in North America rising in 2013 compared to 2012 levels, while 33 per cent see the level staying the same and 3 per cent see a decrease in 2013.
Four in five (89 per cent) advisers in North America believe mega deals and private equity driven leveraged buyouts will be on the upswing in 2013. One in five (22 per cent) advisers see PE firms and strategic buyers pursuing acquisitions during bankruptcy while four in five (78 per cent) believe they will wait for the Chapter 11 process to come to a conclusion before pursuing acquisitions. European advisers predict that distressed assets will go to a mix of private equity (50 per cent) and strategic buyers (39 per cent), tracking with expectations in the US (49 per cent private equity, 32 per cent strategic buyers), but differing from China where strategic buyers are expected to lead private equity in terms of buying distressed assets, 46 per cent vs. 29 per cent, respectively.
Given the ready availability of low-cost debt, for the fourth consecutive year advisers in North America expect an increase in the number of deals being done with all cash (69 per cent), as opposed to a mix of cash and stock (27 per cent) or all stock (five per cent). Consistent with these findings, 78 per cent advisers surveyed in Europe expect to see all cash deals while 22 per cent expect a mix of cash and stock transactions. Fifty-eight percent of respondents in Greater China expect all cash deals, while 42 per cent predict a mix of cash and stock.
Advisers in Greater China see State Owned Enterprises (SOEs) expanding internationally with 69 per cent identifying growing appetite among these companies for outbound acquisitions in 2013. None of the China-based advisers see inbound pursuits driving M&A in 2013. Three in five (59 per cent) European advisers believe inbound deals will drive the global M&A market, a contrast with advisers in North America and China who see a very minor portion (18 per cent and zero per cent, respectively) of deals being driven by inbound activity in their regions.
The survey was distributed to Brunswick’s proprietary database of leading M&A advisers and consultants in March 2013. The results were analysed by Brunswick Insight, the firm’s specialist opinion research practice, focusing on understanding the views of opinion formers around the world.
