M&A deal activity in the EMEA region - focus on small and medium-sized enterprises -

Transcription

1 M&A deal activity in the EMEA region - focus on small and medium-sized enterprises - Presentation for the INTERLAW EMEA Regional Meeting hosted by Lang & Rahmann Düsseldorf, June

2 Content SECTION PAGE A. Short introduction of InterFinanz and Global M&A 3-7 B. Overview of the M&A market in the EMEA region 8-17 World-wide M&A mid-market 9-10 M&A market in the EMEA region in Regional snapshot: European M&A market in Regional snapshot: M&A in MENA region in M&A market in the EMEA region in Q1, 2014 & outlook C. German Mittelstand goes global German Mittelstand : general facts and figures German Mittelstand on the international M&A markets

3 Content SECTION PAGE A. Short introduction of InterFinanz and Global M&A 3-7 B. Overview of the M&A market in the EMEA region 8-17 World-wide M&A mid-market 9-10 M&A market in the EMEA region in Regional snapshot: European M&A market in Regional snapshot: M&A in MENA region in M&A market in the EMEA region in Q1, 2014 & outlook C. German Mittelstand goes global German Mittelstand : general facts and figures German Mittelstand on the international M&A markets

4 A. Short introduction of InterFinanz and Global M&A Founded in 1958, InterFinanz is a pioneer in the German M&A market. With a current staff of 17 professionals, working on average for more than 15 years with InterFinanz, we are proud of having extensive experience and unique expertise. InterFinanz founders: We focus on sell- and buy-side advisory catered to SMEs in Germany, as well as internationally: Business activities Sell-side Advisory Succession Corporate divestiture (Spin-off/Carve-out) Management Buy-out/Buy-in Development & replacement capital Buy-side Advisory External growth Diversification Cross-border expansion Add-on/bolt-on acquisition Buy & build concept 4

5 A. Short introduction of InterFinanz and Global M&A InterFinanz activities in figures Strong track record (over the last decade): 93 completed transactions over 3.5bn accumulated transaction value over 3.5bn accumulated transaction turnover Split by transaction value 16% 29% 55% Widely diversified customer base: 60% medium-sized companies 20% conglomerates/multinational corporations 20% financial investors up to 30m m over 100m Split by transaction turnover 21% Focus on transactions with a value of m 90% sell-side and 10% buy-side mandates over 30% are cross-border transactions 32% 47% up to 30m m over 100m 5

6 A. Short introduction of InterFinanz and Global M&A InterFinanz is one of the exclusive founding partners of Global M&A Partners - the worldwide leading partnership of independent M&A advisory firms Key facts about Global M&A Partners: Founded in 1999 Global M&A Partners celebrates its 15 th anniversary in 2014 Wold-wide leading partnership of 38 independent M&A firms Transacting in over 40 countries across 5 continents Over 200 active dealmakers supported by more than 100 analysts, consulting customers in all aspects of corporate finance equity and debt financing, IPO privatisation restructuring Successful completion of over 1,500 transactions with combined value of 52bn Target transaction range of 20 to 500m Multi-sectors service offering with unique expertise Multicultural spirit with over 20 spoken languages Managed by an Executive Committee of experienced dealmakers Global M&A slogan: International presence, local expertise 6

7 A. Short introduction of InterFinanz and Global M&A 7

8 Content SECTION PAGE A. Short introduction of InterFinanz and Global M&A 3-7 B. Overview of the M&A market in the EMEA region 8-17 World-wide M&A mid-market 9-10 M&A market in the EMEA region in Regional snapshot: European M&A market in Regional snapshot: M&A in MENA region in M&A market in the EMEA region in Q1, 2014 & outlook C. German Mittelstand goes global German Mittelstand : general facts and figures German Mittelstand on the international M&A markets

9 B. World-wide M&A mid-market (1/2) Mid-market M&A transactions (US$ 10 to US$ 250m) remain the mainstay of world-wide M&A activity. mergermarket recorded 10,534 transactions with deal values smaller than US$ 250m compared to 1,175 transactions with deal values exceeding US$ 250m. M&A activity by mid-market companies by geographical regions: Europe dominates the crossborder deal activity. Europe: Value: US$ 61.8bn Volume: 990 Cross-border M&A mid-market (% of total volume): Europe: 38% Asia-Pacific: 30% Americas: Value: US$ 96bn Volume: 1,294 Africa: Value: US$ 4.3bn Volume: 64 Middle East: Value: US$ 3.7bn Volume: 54 Asia-Pacific: Value: US$ 80bn Volume: 1,317 Americas: 27% Africa: 3% Middle East: 2% (based on the dominant geography of the target) Sources: mergermarket, Merrill DataSite, Intralinks, NASDAQ OMX 9

10 B. World-wide M&A mid-market (2/2) World-wide M&A activity of mid-market companies decreased in 2013 (compared to a volume growth in the EMEA region). In 2013 private equity investors realised, on the world-wide M&A mid-market, 452 buyouts with a total value of US$ 35bn and 393 exits with a total value of US$ 35bn (approx. 12% of overall M&A mid-market volume) YoY, drop of 22% in volume and 18% in value. M&A activity by mid-market companies over the years: Year Value, US$ bn Volume , , , , , (January-December) 246 3,719 The largest portion of M&A mid-market activity by volume in 2013 took place in the industrial sector & chemicals, followed by TMT, energy, mining and utilities: Financial services - 9% Others - 30% Business services - 9% Consumer - 10% TMT - 11% Industrials & chemicals - 18% Energy, mining & utilities - 13% Sources: mergermarket, Merrill DataSite, Intralinks, NASDAQ OMX 10

11 B. M&A market in the EMEA region in 2013 Deal numbers in the EMEA region in 2013 vs Africa - 2.3% Total number of deals 2013: 6,077 Middle East - 1.6% Europe % Africa - 1.9% Total number of deals 2012: 5,750 Middle East - 1.6% Europe % +5.7% in total number of deals in the EMEA region in 2013 vs % in Europe +3.2% in Middle East +29.1% in Africa The climate for M&A in the EMEA region, especially in Europe, is currently the strongest since the onset of the latest financial crisis, i.e. increase of over +5% in number of closed deals from 2012 to 2013 (published by mergermarket). M&A activity is driven especially by European economies, in particular by the UK, Ireland and the Germanic countries. Over 95% of all transactions in the EMEA region were realised by European deal makers. Renewed dynamism of M&A activity in the MENA region: +11% in deals volume in 2013 vs Uptick in the number of private equity exits with a volume increase by 18% in 2013 vs (especially due to IPOs and secondary buyouts) vs. value decrease by 16% over the same period. The highest number of European exits in 2013 since The highest level of M&A activity was observed in the sectors: TMT, consumer, pharma, medical and biotech. Slowdown was observed in financial services, energy, mining and utilities. Sources: mergermarket, Merrill DataSite, Intralinks, InterFinanz 11

12 B. Regional snapshot: European M&A market in 2013 Slowdown in M&A activity in Q1, 2013 had a detrimental impact on the whole year 2013 value decrease by 14% in 2013 vs. 2012, despite an increase of deal volume by over 5%. Decrease in the size of the largest transactions: in 2013 deals with a target value of over 5bn generated a total worth of 94.6bn vs. a total worth of 161.8bn in European M&A split by deal value European M&A split by deal volume +5% -14% Sources: mergermarket, Merrill DataSite, Intralinks, InterFinanz 12

13 B. M&A opportunities in geographies and sectors Top 3 sectors in top 3 geographies: CEE (excl. Russia) UK & Ireland Germanic Italy Russia Nordic MENA Benelux SEE France Iberia Total Consumer Industrials & chemicals TMT Energy, mining & utilities Financial services Business services Pharma, medical & biotech Leisure Transportation Construction Real estate Agriculture Defence Other Governmet Total ,649 Based on the mergermarket track companies for sale in the EMEA region between August 2013 to January 2014 Less importance of domestic acquisitions to drive acquisitive growth amongst European businesses European companies continue to show an increasing desire to drive their growth through cross-border acquisitions. Over 45% of the German M&A market players expect their acquisitive growth to be cross-border, 61% for Spain, 57% for the Netherlands, 51% for Ireland, 39% for Italy, 32% for France, 31% for UK, 25% for Sweden (i.e. European average of 39%). 13

14 B. Regional snapshot: M&A in MENA region in 2013 (1/2) Positive development of M&A market despite political instability in most of the MENA region: 186 deals with a total value of 28.4bn closed in 2013 vs. 167 deals with a total value of 22.9bn in 2012 the best M&A year since 2007 (i.e. 235 closed deals with a volume of 35.4bn). The highest M&A activity was observed in 2013 in the UAE, Saudi Arabia, Qatar and Oman (currently the most politically and economically stable countries in the MENA region). M&A remained almost non-existent (or very limited) in the regions of Levant and North Africa. Quarterly trends in M&A activity by deal value Quarterly trends in M&A activity by deal volume Average trend line Average trend line Sources: mergermarket, Merrill DataSite, Intralinks, InterFinanz 14

15 B. Regional snapshot: M&A in MENA region in 2013 (2/2) The best performing sectors in terms of M&A activity in 2013 were industrials & chemicals (total volume of 8.5bn), followed by TMT, energy, mining & utilities, and consumer. Most attractive for M&A opportunities were all demographically driven sectors (e.g. consumer, retail, healthcare, education), as well as oil & gas. Only a handful of large transactions (e.g. takeovers, mergers). Foreign companies and potential investors still preferred cooperations in form of JVs more than company takeovers. Mix of M&A deals by industry sector & value Mix of M&A deals by industry sector & volume Real estate - 0.2% Pharma, medical & biotech - 0.4% Financials services - 5.1% Business services - 7.6% Leisure - 0.1% Transportation - 0.1% Defence - 0.1% Agriculture - 0.1% Industrials & chemicals % Business services - 2.4% Defence - 1.6% Transportation - 3.2% Agriculture - 0.8% TMT - 4.8% Industrials & chemicals % Leisure - 5.6% Consumer - 9.2% Pharma, medical & biotech - 6.4% Consumer % Construction - 9.6% TMT % Construction - 8.8% Energy, mining & utilities % Real estate - 9.6% Energy, mining & utilities % Financials services % Sources: mergermarket, Merrill DataSite, Intralinks, InterFinanz 15

16 Deal value (US bn) Deal value (US bn) B. M&A market in the EMEA region in Q1, 2014 (1/2) Status quo: YoY data shows an increase by almost 21% in deal volume in the Q vs. the Q in the EMEA region M&A market is expected to be likely more robust in 2014 vs QoQ, volume increase by approx. 5%. The overall deal value increased by over 25% YoY, remaining however, rather flat on QoQ basis shrinking number of mega deals and increasing role of SMEs on the M&A market. This increase was mainly however, due to upturn on the European M&A market, whereas the MENA region faced in Q the lowest value for a quarter in almost 5 years. M&A trend in Europe M&A trend in the MENA region 1,600 1, , , Q1 M&A Value Q2 M&A Value Q3 M&A Value Q4 M&A Value Q1 M&A Value Q2 M&A Value Q3 M&A Value Q4 M&A Value Sources: mergermarket, Merrill DataSite, Intralinks, Thomson Reuters 16

17 B. M&A market in the EMEA region in Q1, 2014 (2/2) Market trends and outlook Cross-border activity increased in value in Q1, 2014 by over 7% vs. Q4, 2013 and by over 60% vs. Q1, 2013 upward trend through cross-border acquisitions. Increase by 10% in both volume and value for private equity deals private equity market continues to expand. Top sectors with M&A activity and numerous M&A opportunities are: TMT, life sciences, healthcare & pharma, energy, consumer and industrial. Crucial key issues for ongoing development and performance of M&A market in the EMEA region are: political instability and tensions (e.g. Russia & Ukraine), robustness of the economic recovery, tightening of local policies and regulations. M&A deal makers hope for an imminent M&A revival: The Q numbers show how much momentum M&A has gained after a long period of tepid dealmaking due to the crisis. Companies are cash rich and the economy is on the mend, both of which also bode well for a pick-up in M&A activity later in the year. (N.N., an investment banker) Considering the current pace of M&A activity and ongoing trends, and after a five-year gap, M&A activity will likely exceed precrisis levels. The industry has been waiting for the market to recover and now companies are ready to use their cash on hand for M&A as a way to grow their businesses. (N.N., an investment banker) Sources: mergermarket, Merrill DataSite, Intralinks, Thomson Reuters 17

18 Content SECTION PAGE A. Short introduction of InterFinanz and Global M&A 3-7 B. Overview of the M&A market in the EMEA region 8-17 World-wide M&A mid-market 9-10 M&A market in the EMEA region in Regional snapshot: European M&A market in Regional snapshot: M&A in MENA region in M&A market in the EMEA region in Q1, 2014 & outlook C. German Mittelstand goes global German Mittelstand : general facts and figures German Mittelstand on the international M&A markets

19 C. German Mittelstand : general facts and figures (1/2) German Mittelstand as the engine of the German economy SMEs form the heart of the German social market economy and serve as the key engine for growth and employment. Commonly used German definition of SMEs in quantitative terms: Enterprise category Number of employees and Annual turnover, million Small businesses < 9 < 1 Mid-sized businesses < 499 < 50 (SMEs) together < 500 < 50 Alternative definition: Revenue, bn Number of companies Share of exports, in % Large corporations > 1,000 million in revenue (42.6%) 141 (0.0005%) 58.7% Upper mid-size companies 250-1, (12.7%) (10.4%) (7.5%) 505 (0.002%) 1,064 (0.04%) 1,649 (0,06%) 30.6% German upper mid-size companies are businesses with an annual turnover of over 50 million and a total staff of up to 3,000 employees. Mid-size companies < 50 million in revenue (26.8%) 273,695 (98.8%) 10.7% Sources: IfM Bonn, BDI 19

20 C. German Mittelstand : general facts and figures (2/2) German Mittelstand : essential characteristics and distinctive features: Strong qualitative dimension combining hard figures and a certain business philosophy: predominantly family-owned and managed (i.e. approx. 95% of SMEs and upper mid-size companies are family-owned, approx. 85% - family-managed), long-term business policies thinking in generations rather than quarterly results, focus on stable client relations and continuous HR policy, training provided by Mittelstand makes a major contribution towards a relatively low level of youth unemployment (i.e. 7.9%) sound financing models with strong equity ratios, regionally rooted with global ambitions strong position on foreign markets, recognised market leaders. Hidden champions: market leader in their respective world market over 1,300 world market leaders from the German Mittelstand (out of 2,734 worldwide in 2012) positioned themselves successfully in the market niches. Germany accounts for 16 hidden champions per 1 million inhabitants (vs. 1.1 for France, 1.2 for the US, 1.7 for Japan). Sectorial distribution in the SMEs sector: (based on the data for 2012) Transportation & data transmission - 4.9% Catering & hospitality - 3.1% Financial services - 5.0% Other industries - 6.0% Business services % Manufacturing - 7.6% Trade % Construction % Sources: IfM Bonn, BDI, Deutsche Bank, KfW Bankengruppe Other services % 20

21 C. German Mittelstand on the international M&A markets German M&A mid-size market in general Most of the German upper mid-size companies consider M&A as an intrinsic part of their strategy to achieve scale and competitive advantages, to develop their distribution channels and expand their business aside from organic growth. Improving economy and market conditions favour a positive development and stabilisation of the German M&A mid-sized market: i.e. increase of mid-sized transactions in 2012 by approx. 60% vs The overall recovery of the German mid-size market is still hampered however, by ongoing problems in the Eurozone, market volatility and economical uncertainties. External and internal factors influencing decision-making of M&A mid-size market players in Germany External factors Relevance for the decision-making Market environment in general "very high" Capital market environment "very high" Competition "high" Economy "high" Political environment "high" Technological development "moderate" Globalisation "moderate" Based on the study by Deloitte, 2012 Internal factors Structural change Strategical change Succession issue Financial situation Internationalisation Improvement of risk diversification Relevance for the decision-making "very high" "very high" "high" "high" "high" "moderate" Sources: mergermarket, Bundesverband Mergers & Acquisitions, Deloitte 21

22 C. German M&A mid-size market: general analysis Transaction types analysis 80% 70% 60% Split by transaction volume 38.0% German mid-size market players are rather risk-averse 62.0% 50% 40% 30% 73% 20% Asset deal Share deal 10% 0% 19% < 15 million million > 50 million 8% 40% Ability/suitability of a mid-size company to conduct a transaction 35% 30% 25% 20% 15% 10% 5% 0% 0% 19% 35% "very low" "low" "moderate"/ "no estimation" 33% "high" 13% "very high" Sources: mergermarket, Bundesverband Mergers & Acquisitions, Deloitte Potential deal breaker by relevance Potential "deal-breakers" Relevance Purchase price discrepancies "very high" Unexpected/hidden risks "very high" Insufficient financial performance "very high" Deal size/complexity "high" Lack of (strategic) fit "high" Personal reasons/rationale "moderate" Cultural differences "moderate" Others "moderate" Based on the study by Deloitte,

23 C. General M&A mid-size markets: development in figures Deal volumes with a German mid-size company as a target World-wide deal volumes with a German mid-size company as a buyer Number of deals Number of deals +31.8% Q Q Q Q % Buyer origin (as of total number of deals in 2013) Target location (as od total number of deals in 2013) Middle East - 1.6% Africa - 0.0% Middle East - 1.2% Africa - 0.0% Asia % Domestic deals: approx. 30% Europe % Asia % Europe % Americas % Note: analysis of M&A mid-sized market with a deal value between 10 and 250 million Americas % Sources: mergermarket, InterFinanz 23

24 Speaker Christian Kollmann Managing Director with InterFinanz GmbH Member of the Board and Company Secretary of Global M&A Partners After training as reserve officer with paratroopers, Christian graduated as a Master of Business Administration from the University of Erlangen- Nuremberg, and gained extensive international experience in industry and administration in Tokyo, Mumbai and Los Angeles. He joined InterFinanz in Christian gained expert knowledge in the industries of automotive, mechanical engineering, IT & telecommunications, food & beverages, medical equipment, construction materials and services. Since 2006 Christian is the head of Global M&A Partners sector team Industrial Growth (automation, controls & electrical products, automotive & industrial products) and a member of the Board of Global M&A Partners. Married, two children

25 Contact InterFinanz GmbH Tersteegenstr. 28 D Düsseldorf Germany T.: + 49 (0) F.: +49 (0) Christian Kollmann kollmann@interfinanz.com 25