m&a mid-market: what after the credit crunch? november 2007 7 th m&a mid-market forum,...
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M&A Mid-Market: What After The Credit Crunch? November 2007 7 th M&A Mid-Market Forum, Paris. David Bernard Vice-President, Investment Banking & Private Equity [email protected]. Has European M&A Activity Peaked?. - PowerPoint PPT PresentationTRANSCRIPT
M&A Mid-Market: What After The Credit Crunch?
November 2007
7th M&A Mid-Market Forum, Paris
David BernardVice-President, Investment Banking & Private [email protected]
2
Has European M&A Activity Peaked?
24.7%16.8% 29.7%
25.2% 29.1%20.1%
17.0%
Announced M&A Transactions with European Target, Total Deal Value and Number of Deals, by Announcement Date
16.6% 16.7% 16.4% 18.5% 17.9% 20.1% 16.6%
Source: Thomson Financial
-
100
200
300
400
500
600
Q1 19
97
Q3 19
97
Q1 19
98
Q3 19
98
Q1 19
99
Q3 19
99
Q1 20
00
Q3 20
00
Q1 20
01
Q3 20
01
Q1 20
02
Q3 20
02
Q1 20
03
Q3 20
03
Q1 20
04
Q3 20
04
Q1 20
05
Q3 20
05
Q1 20
06
Q3 20
06
Q1 20
07
Q3 20
07
€ b
illio
ns
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
Total Deal Value (left-hand side) Number of Deals (right-hand side)
3
The Credit Crunch Has Had An Impact on European M&A and Private Equity Activity
-
50
100
150
200
250
300
Jan-
06
Feb-0
6
Mar
-06
Apr-0
6
May
-06
Jun-
06
Jul-0
6
Aug-0
6
Sep-0
6
Oct-0
6
Nov-0
6
Dec-0
6
Jan-
07
Feb-0
7
Mar
-07
Apr-0
7
May
-07
Jun-
07
Jul-0
7
Aug-0
7
Sep-0
7
Oct-0
7
€ b
illio
ns
with Private Equity Involvement without PESource: Thomson Financial
Announced M&A Transactions with European Target, Total Deal Value and Number of Deals, by Announcement Date
4
Debt Financing at a Standstill
Source: Thomson Financial
34
43
65
43
61
52
42
31
1612
0
10
20
30
40
50
60
Jan-07
Feb-07
Mar-07
Apr-07
May-07
Jun-07
Jul-07
Aug-07
Sep-07
Oct-07
€ b
illio
ns
10
20
30
40
50
60
70
Proceeds (€ bln)
# of Issues
4
5
2
8
6
12
3
0
1
2
3
4
5
6
Jan-07
Feb-07
Mar-07
Apr-07
May-07
Jun-07
Jul-07
Aug-07
Sep-07
Oct-07
€ b
illio
ns
2
4
6
8
10
12
14
Proceeds (€ bln)
# of Issues
European Leveraged Syndicated Loans, Total Deal Value and Number of Issues
European High-Yield Bond Issues, Total Deal Value and Number of Issues
5
IPO Activity in Europe Has Slowed Down in Q3 2007
European IPO Activity
Source: Thomson Financial
0
5
10
15
20
25
30
35
2006Q1 2006Q2 2006Q3 2006Q4 2007Q1 2007Q2 2007Q3
€ b
illio
ns
0
20
40
60
80
100
120
140
160
180
200
IPO Proceeds (left-hand side) Number of issues (right-hand side)
6
European M&A Deal Volume Has Been Most Affected for Large Deals
Total Deal Value by Deal Size, Announced M&A Transactions with a European Target
152
87 93
158
109
280
17 16 189 8 9 13 8 8 7
97
10
89 100
50
100
150
200
250
300
1Q 06 2Q 06 3Q 06 4Q 06 1Q 07 2Q 07 3Q 07
€ b
illi
on
s
950
1,000
1,050
1,100
1,150
1,200
1,250
1,300Above €2bn €500m to €2bn Below €500m # of Deals below €500m (right-hand side)
Source: Thomson Financial
7
Similarly, European Mega-Buyout Transactions Have Virtually Disappeared in the Last 3 Months
29
13
21
35
22
35
17 1618
9 8 9 13 8 8 7
10
8910
0
5
10
15
20
25
30
35
40
1Q 06 2Q 06 3Q 06 4Q 06 1Q 07 2Q 07 3Q 07
€ b
illi
on
s
20
40
60
80
100
120
140
160
180Above €2bn €500m to €2bn Below €500m # of Deals below €500m (right-hand side)
Total Deal Value by Deal Size, Announced Leveraged Buyout Transactions with a European Target
Source: Thomson Financial
8
Global Fees Generated from LBOs Had Surpassed Private Equity Exit Fees in 2006
Source: Thomson Financial / Freeman & Co
9
But Fees on PE-Backed Transactions Have Dried Up Post-Summer 07
574
897
769
870810
763
299482
446
613 624
512
711
221
1,129
782
853
69
78105140 130 51
26 39 38
$0
$200
$400
$600
$800
$1,000
$1,200
Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07
$ m
illi
on
s
US
Europe
Asia-Pacific
Global Investment Banking Fees Generated for Private Equity Backed Transactions
(M&A, Equity Issues, Bond Issues, Structured Finance, Syndicated Loans Issues)
Source: Thomson Financial / Freeman & Co
10
Listed Companies Remain Affordable On Average
Evolution of P/E Ratios, European public equity marketsForward values based on aggregate mean broker estimates
Source: Thomson Financial
P/E Ratios in the European stock market have been around 15 for the last 3 years
Brokers anticipate earnings to grow more rapidly that stock prices, leading to a target P/E of 11.3 in 3 years’ time
5
10
15
20
25
30
Feb
-199
7
Aug
-199
7
Feb
-199
8
Aug
-199
8
Feb
-199
9
Aug
-199
9
Feb
-200
0
Aug
-200
0
Feb
-200
1
Aug
-200
1
Feb
-200
2
Aug
-200
2
Feb
-200
3
Aug
-200
3
Feb
-200
4
Aug
-200
4
Feb
-200
5
Aug
-200
5
Feb
-200
6
Aug
-200
6
Feb
-200
7
Aug
-200
7
Feb
-200
8
Aug
-200
8
Feb
-200
9
Aug
-200
9
11
And Acquisition Premia Have Stabilised at an Historically Low Level
Source: Thomson Financial
43% 43%
36%
25% 25%33% 34%
32%
25% 25%
19%20%
13%17%
20%
21%21%18%
20%23%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Private Equity Acquiror
Corporate Acquiror
Average Price Premium (Offer vs. Price 4 Weeks Prior to Announcement) for European M&A Transactions
12
Cash Is Still King – For How Long?
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2000 2001 2002 2003 2004 2005 1Q2006
2Q2006
3Q2006
4Q2006
1Q2007
2Q2007
3Q2007
4Q2007
Other
Shares
Cash
Shares/Cash
Consideration Analysis for European M&A Transactions
Source: Thomson Financial
13
Conclusions
Mid-Market Activity Stable
Fundamentals Still Strong
The Right Deals Get Done
Less Competition for Strategic Buyers
Consolidation at Play in Many Sectors
Larger Players (Banks, PE) Coming Back to Mid-Market
Pressure on Fees?
14
Thank You