Global M&A Valuation Outlook 2013: Spending Splurge as Asia Pays More for European Assets

LONDON, May 20, 2013 /PRNewswire/ --

• Asia-to-Europe EBITDA multiples jump to 9.9x in 2012 from 5.7x a year earlier
• Europeans retract from slowdown-ridden China as inbound M&A drops 16%

China, Japan and India are paying more for quality European assets, bucking a trend of declining company valuations throughout the rest of the world, according to a new report on global M&A trends. The EBITDA multiples paid by these countries for deals abroad have been rising over recent years, increasing from 3.8x in 2010 to 5.7x in 2011 and 9.9x in 2012, with this level showing all signs of continuing during 2013.

The core driver behind the trend is the desire by Asian companies to seek out prized Western assets to boost their international footprints, such as China-based Bright Food's high-profile acquisition of Weetabix in 2012. Despite a mixed bag of GDP figures from China, Japan and India, all three countries are looking abroad for big-name brands as well as industrial assets, which can bolster both their infrastructure and economy.

Since 2008, Asian buyers have been drawn to Europe by depressed multiples compared with their domestic markets, but increased demand in 2012 pushed up M&A volumes and valuations to 2006/2007 levels, despite the Eurozone crisis. At the same time, global EBITDA multiples fell in 2012 to 8.8x from 9.6x a year earlier, notwithstanding a surge in deal-flow in the final quarter of 2012.

Meanwhile, the proportion of deals taking place domestically in China rose by 16%, as foreign buyers retracted based on the country's rate of growth. Whilst in 2011 overall M&A involving Chinese companies was evenly split at 49% domestic and 51% inbound, this shifted to 65% domestic and 35% inbound during 2012.

These are some of the top findings from a report published today by global valuation specialists American Appraisal, Global M&A Valuation Outlook 2013. The wide-reaching report, now in its second year, draws on in-depth analysis of American Appraisal's own data from deals compiled from its 27-country network of operations in 2012 combined with industry data on international corporate deal-flow.

Mike Weaver, Managing Director at American Appraisal, commented:

"Asian firms with fat wallets are turning to European companies to fill up on quality assets. Luckily for Europe, these targets which comprise popular brands and industry leaders come at a price. There's no doubt about it: China, Japan and India are willing to pay more than we've seen in recent history, a nod to Europeans sellers about who they should be flirting with the most.

"Ultimately, this global data is a timely reminder that M&A is always alive somewhere in the world; it simply bounces around between continents and sectors. It's a popularity contest if nothing else. But in the end everything comes down to value."

Other key findings from the Global M&A Valuation Outlook 2013 include:

• Increased write-downs, owing to over-estimated economic forecasts, are pushing down valuations but goodwill accounting remains high, indicating that companies are looking to minimise amortisation charges and bolster net earnings; this trend is expected to be mixed in 2013 depending on sector and region.
• Private equity exits were buoyed by secondary buyouts, representing 25% of all deals by volume in the second half of 2012 and 40% by value, with American Appraisal forecasting similar levels throughout 2013. This compares to an average over the last eight years of 20% of all deals by volume and 30% by value.
• Energy and mining company EBITDA multiples fell to 8.6x in 2012 while deal volumes reach five-year high. Impairment charges set to increase as demand for resources weakens.
• Technology multiples are down to 8.6x due to a lull in innovation as future products and ideas are still in the lab. 

Please visit http://www.american-appraisal.com to receive a full copy of the Global M&A Valuation Outlook 2013 report.

About American Appraisal

American Appraisal was founded in 1896 and focuses exclusively on valuation and valuation related services. American Appraisal has 60 international offices in 27 countries, more than 900 employees, and annual revenues in excess of US$170 million. The Firm's client base includes many Fortune 1000 companies who turn to American Appraisal for assistance with their M&A deals. For more information, please visit http://www.american-appraisal.co.uk.

SOURCE American Appraisal