Confidence Building in European M&A Market says CMS and Mergermarket Study

FRANKFURT, Germany, October 28, 2013 /PRNewswire/ --

M&A executives in Europe are becoming more optimistic about deal flow, according to research with 225 practitioners by global law firm CMS and Mergermarket.

The UK and Ireland remains Europe's biggest M&A market, contributing over 22% of the total deal value for Q1 to Q3 2013. There are generally encouraging signs for the Eurozone market with Eurozone M&A values increasing in Q1 to Q3 2013 by 30% compared with the equivalent period in 2012.

Nearly half of the respondents (48%) expect that European M&A levels will increase in the next year; only 10% expect a decrease and the balance anticipate that deal-making figures will remain constant.  

Respondents from the Nordics (68%) and Central and Eastern Europe (CEE), Russia and the Ukraine (64%) are the most positive, with those in Iberia being the least buoyant, although a quarter (24%) of respondents in the region still expect an increase in activity.  Meanwhile respondents from the UK and Ireland (44%) also expect an increase in activity.

Nearly a third of respondents (29%) are considering acquisition, whereas more than half (55%) say they are not thinking about M&A.  

M&A executives expect Northern Europe will be the most active for deals over the next year, with over a quarter (28%) of respondents pointing to German-speaking countries and 18% to the UK and Ireland as the busiest.

On the buy-side, deal-flow is expected to be driven by increased appetite from foreign acquirers (62%), followed by the availability of undervalued targets (57%) and cash-rich operators (52%).  On the sell-side, practitioners anticipate the biggest catalysts to deals will be capital raising for expansion in fast-growing markets (69%) and distress sales (68%).

The top five sectors for M&A are expected to be:  TMT (41% of respondents); Energy, Mining and Utilities (38%); Industrials and Chemicals (37%); Pharma, Medical and Biotech (35%); and Financial Services (34%).

Asia-Pacific is the number one regional target for European companies considering acquisitions outside of the continent (35% of respondents), followed by North America (31%).

Most respondents (82%) expect cross-border M&A will increase into Europe in the next year, with Asian-Pacific (45%) and North American (40%) companies being the most active.

Thomas Meyding, Head of CMS Corporate Group, said, "Our research makes clear that confidence is returning to the European M&A market and many of the fundamentals underpinning the market are stronger than they have been for some time.  

The profile of buyers in Europe continues to change and we expect to see more evidence of this as M&A activity picks up.  Strategic investors with strong balance sheets are active in the mid-market, particularly with bolt-on acquisitions.  New investor groups from Asia-Pacific, particularly Chinese and Korean, are increasingly turning to Europe as part of their expansion plans. Russian and US investors are also more prevalent now than they have been over the last three years, especially in Western Europe."

Martin Mendelssohn of CMS London said: "All the factors for a healthy M&A market appear to have come together, namely a lower cost of capital, high corporate cash balances, limited organic growth opportunities and more effective valuation levels.  The recent period of relative stability and growth in the UK has generated a more "can do" attitude amongst financial and trade investors alike.  Although the first half of 2013 was disappointing, I expect the results in the second half of 2013 to reflect the greater optimism and confidence in the UK as demonstrated by the latest figures for UK targeted M&A in Q3 2013, which show a 20% increase in value from the previous quarter and a stronger performance in value and volume compared with the same period in 2012."

In terms of financing, the largest share of respondents (40%) expects the environment to remain the same over the next year.  Nearly a third (32%) think obtaining funding will be slightly easier, with the most confident regions being the German speaking countries and CEE, including Russia and Ukraine (both 52%) compared with 36% in the UK and Ireland.

The sovereign debt crisis is the biggest threat to European business, according to respondents, followed by weak domestic demand.

NOTES TO EDITORS

CMS

Founded in 1999, CMS is a full-service top 10 global law firm, based on the number of lawyers (Am Law 2012 Global 100).  With 55 offices in 30 countries across the world, employing 2,800 lawyers, CMS has longstanding expertise both at advising in its local jurisdictions and across borders.  CMS acts for a large number of Fortune 500 companies and the FT European 500 and for the majority of the DAX 30.  Revenues totalled €837.7m in 2012.

CMS is a leading firm for M&A based on the number of deals completed.  In the third quarter of 2013 CMS was ranked: 1st in Germany (Mergermarket, and Thomson Reuters Worldwide); 1st in Central and Eastern Europe (Bloomberg, Mergermarket and Thomson Reuters Worldwide); and 1st in Europe by number of deals announced (Thomson Reuters).

CMS provides a wide range of expertise across 17 expert practice and sector areas including Corporate, Energy, Lifesciences/Pharmaceuticals, TMT, Tax, Banking and Finance, Commercial, Competition, Dispute Resolution, Employment, Intellectual Property and Real Estate & Construction.  

For more information, please visit http://www.cmslegal.com.

CMS offices and associated offices: Aberdeen, Algiers, Amsterdam, Antwerp, Barcelona, Beijing, Belgrade, Berlin, Bratislava, Bristol, Brussels, Bucharest, Budapest, Casablanca, Cologne, Dresden, Dubai, Duesseldorf, Edinburgh, Frankfurt, Hamburg, Kyiv, Leipzig, Lisbon, Ljubljana, London, Luxembourg, Lyon, Madrid, Mexico City, Milan, Moscow, Munich, Paris, Prague, Rio de Janeiro, Rome, Sarajevo, Seville, Shanghai, Sofia, Strasbourg, Stuttgart, Tirana, Utrecht, Vienna, Warsaw, Zagreb and Zurich.

SOURCE CMS