Corporate finance executives see emerging markets as the most active region for deals next year
After two years of double-digit declines in M&A activity worldwide in 2008 and 2009, and a mixed 2010, IROs can look forward to a busy 2011 with an expected 36 percent uptick globally, according to a survey of 150 corporate executives.
Financials and real estate will drive the increased activity, according to the second annual Thomson Reuters/Freeman Consulting Outlook for Investment Banking Services survey.
In general, competitive strategy is driving M&A across all industries. Competition for market position is the strongest factor driving activity within healthcare, while competition for assets is seen as the biggest obstacle restraining M&A in the consumer and retail sectors.
Equity valuations are expected to rise in 2011, prompting IPO spin-offs and exits, while equity capital markets activity is expected to increase by 21 percent, driven by media, entertainment and real estate.
Half the respondents to the survey agree IPOs will be a more attractive exit option for growth-stage companies than M&A, but 53 percent disagree that firms will favor equity over debt in the current low interest rate environment. Emerging markets in Asia are seen as the most active arena for M&A (47 percent), followed by North America (40 percent).
An interesting coda to this last point comes from Matt Miller, editor of The Deal, speaking recently at a Faegre & Benson M&A conference in Minneapolis.
‘Globalization is a truism, never more so than today,’ he said at the event. Acknowledging that European companies are looking for acquisitions in the US, Miller observed that ‘the real action will come from Asia’ and that the Chinese ‘are continuing their march’ in search of natural resources, expertise and market access.
‘Then there’s India,’ Miller added. ‘There are companies there sitting on billions and billions of dollars, with valuations very high compared with American companies.’
