Noted: Europe SA on the takeover trail?

December 16, 2009

A poll from UBS and the Boston Consulting Group finds a “surprisingly healthy” one in five European companies is likely to make a significant (EUR 500 mln+ in sales) acquisition in 2010. Some of the other key findings:

“Corporates are seeking growth: Strategic and growth-related considerations such as expansion of product offering, access to new geographies and access to new customers and distribution channels were the three most cited drivers of M&A activity, from a choice of 12 drivers.

“Lack of attractive targets and company valuations are main M&A barriers: Lack of attractive targets (cited by 40% of respondents) and, reflecting the speed and extent of stock markets’ recovery, high valuations (cited by 39% of
respondents) were the most commonly cited barriers to M&A.

“Self-imposed financing constraints: Corporates plan to rely on internal financing for deals. 42% of respondents plan to use existing cash reserves or cash flow whilst 23% would use existing debt facilities. Beyond this there is a clear
preference for equity financing (14%) over new bank loans (5%) or traded debt issues (4%). This suggests an upper limit to deal sizes over the next year – consistent with the early stages of other M&A waves.

“Not many mega deals yet: Only 20% of respondents expect a transformational deal in their sector vs. 43% in last year’s survey. This is consistent with (1) a preference for internal funding of deals, (2) product markets not having undergone
the seismic change that many expected a year ago, (3) still relatively moderate risk appetite of senior executives and (4) perceived higher valuations …

“Corporate restructuring outlook: Restructuring expectations are high; 66% of respondents expect more deal-based restructuring in their industry over the next 12 months. “Forced” divestitures and voluntary sales of underperforming
businesses are expected to feature heavily (29% of respondents each).

“Shareholder activism: A significant majority (75%) of respondents expect more pressure from investors, banks and other creditors to conduct more deal-based restructuring in their sectors.

“Return of Private Equity: Higher financial investor involvement is expected, although more as sellers (cited by 54% of respondents) than as buyers (36% of respondents).”

In a linked note, UBS’s “special situations” team also names its top picks for European M&A: Aegis, Basilea, C&C, Croda, Kloeckner, Meggitt, Peugeot, Sonaecom, and Temenos.

Post Your Comment

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see