One in Five European Companies Planning M&A Deal in 2010
Confidence is returning to the European mergers and acquisitions market, with a significant proportion of companies planning a major deal in 2010, according to the second annual survey of European companies’ M&A plans, conducted by The Boston Consulting Group (BCG) and UBS Investment Bank.
Yet ongoing uncertainties about the economic outlook and sustainable levels of profitability are likely to lead to smaller, lower-risk consolidation deals than before and might deter some companies from entering the M&A market.
As the survey reveals, there are grounds for being both courageous and cautious.
Key findings include the following:
- One in five companies plans to buy a business with sales of more than €500 million in 2010, including nearly one in two large companies with market capitalizations in excess of €20 billion.
Although there are substantial variations among industries, one of the encouraging signs is that 44 percent of companies within the chemicals sector—often a harbinger of economic recovery—are planning to make a large-scale acquisition within the next 12 months.
- M&A transactions are most likely to be “horizontal” consolidation deals, expected to be the dominant deal type by 68 percent of surveyed companies. Typically, these are expected to be smaller, lower-risk acquisitions than the transformational deals previously anticipated for and to some extent executed in 2009. This indicates that there is a degree of caution in the market and that the effects of the financial and economic crisis are still being felt.
- Restructuring deals are also expected to rise steeply, with nearly one out of three companies planning to strengthen its strategic and financial positions by divesting businesses. These disposals will be essential not only for cleaning up corporate portfolios but also for generating proceeds to help fund new acquisitions as the M&A market picks up. In fact, 75 percent of companies believe that investors, banks, and other creditors will exert greater pressure to go down the deal-based restructuring route in the coming 12 months. Moreover, one-third of companies believe that even distressed divestitures could make valuable targets.
Full free report can be downloaded here.
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