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New uncertainties delay M&A recovery


08 July 2013

The UK remained the most attractive market for buyers after the U.S. according to Allen & Overy’s latest M&A Index. Foreign buyers made 36 acquisitions in the UK worth USD35 billion in the first half of this year (compared to 43 acquisitions worth USD41bn in the same period last year), according to the latest Allen & Overy M&A Index. In contrast, UK companies made 29 deals abroad worth USD18.5bn in H1 2013 (compared to 40 acquisitions worth USD20.5bn last year), led by Vodafone’s USD7.7bn acquisition of Kabel Deutschland. 

The U.S. continues to rank as the most popular market for foreign buyers (56 deals worth USD44bn in H1 2013) and continues to be the most aggressive outbound acquirer (83 deals worth USD78bn in H1 2013).  Foreign buyers have shown increasing interest in acquiring companies in China, with 24 deals worth USD8.9bn in H1 2013, compared with 13 deals worth USD5.3bn in the same period last year.  

Amid a global slowdown in M&A activity, UK levels picked up in the second quarter, although they still remained down by 21% for the first half of the year compared to the same period last year. Global M&A activity was down 29% in H1 2013 with the total number of deals falling to 895 – the lowest half year total since 2009 – as renewed economic and political uncertainty deterred deal-making.

In the second quarter of 2013, worries about the future of the Euro subsided, however the much-hoped for M&A recovery was put on hold as a new set of worries emerged. In the U.S., the Federal Reserve’s intention to wind down its programme of bond buying sparked fears of higher interest rates. Elsewhere concerns about China’s slowdown persisted, while popular protests in the Middle East and Brazil and sharp currency devaluations across many emerging markets have led to significant market turbulence.

Despite the depressed activity, the Index does give reasons to remain optimistic about the M&A markets as Dirk Meeus, co-head of Allen & Overy’s global corporate practice, comments: “Despite the sea of economic and political troubles currently confronting investors, we continue to believe that M&A markets are growing in strength and will continue to recover in the rest of the year. Interest rates remain at historical lows, corporates and private equity houses continue to have plenty of cash and access to financing continues to improve for the right deals. Even in Europe we are seeing many more deals in the pipeline and that bodes well for a much busier second half of the year. Risks can be turned into opportunities – it is a case of fortune favouring the brave.”

This issue of the Index highlights a number of significant cross-border deals that took place in the second quarter of 2013, such as the biggest ever deal by a Japanese bank in Asia (Bank of Tokyo-Mitsubishi’s voluntary tender offer for the Thai bank, Bank of Ayudhya) and potentially the largest U.S. acquisition by a Chinese company (Shuanghui International’s agreed bid for Smithfield Foods). At the same time, competition over a number of mega deals in the U.S. remains fierce, as demonstrated by the battle to control Sprint Nextel and the continuing fight over the future for Dell. Another key issue addressed in the report  is the burst of intense shareholder activism, with investors in U.S. companies such as  PepsiCo, Microsoft and the oil giant Hess now directing corporate strategy.

The M&A Index provides market insight and commentary by Allen & Overy and partners, backed up by independently commissioned quarterly research on (USD100m+) global M&A deal types and analysts of top global outgoing buyers and target markets. Some global trends from the latest report include:

  • Fears for the future of the Euro have subsided, but Western European economies remain in a low growth cycle. In a quiet quarter there were nevertheless some good-sized deals, and the pipeline for transactions in Germany, the Netherlands, the UK and France is looking healthier than for some time.

  • The U.S. M&A market continued to gain momentum in the second quarter. Despite economic uncertainty, there was a surge in competitive megadeals and a sharp increase in shareholder activism.

  • The sweeping remedies sought by the U.S. Department of Justice to clear the USD20bn merger between AB InBev and rival brewer Groupo Modelo provide salutary lessons about what dealmakers should expect from competition authorities in the U.S. and other markets.

  • In China, where it is easier for state-owned enterprises to obtain deal financing, it remains to be seen  if government reforms will open the market to private companies.

For further information, please contact Margherita Orlandini,, on +44 (0)20 3088 4196.




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H1 2013

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