The Cross-Border M&A Reporter - Livingstone · 2018. 11. 7. · cross-border M&A activity in the mid-market space. Both the ... SWFs and private equity firms have specific advantages

The Cross-Border M&A ReporterA Global M&A GmbH/mergermarket report on cross-border M&A activity: 6th Annual Global M&A Conference

May 2009

ContentsForeword 3

Methodology 3

Trends in mid-market M&A activity 4

Spotlight on the Healthcare sector 9

Cross-border mid-market distressed M&A 11

Historical M&A Analysis 13

Selected Global M&A Deals Q4 2008 - Q1 2009 17

Global M&A Contacts 18

Notes 19

3

The Cross-Border M&A Reporter

ForewordGlobal M&A GmbH is proud to present the May 2009

edition of The Cross-Border M&A Reporter. This report

explores the key issues influencing mid-market cross-border

M&A activity in the current climate. To provide a direct and

personal look at these mid-market issues, Global M&A has

commissioned mergermarket to interview private equity

practitioners and corporate executives regarding current

mid-market trends, and to examine historical data on global

cross-border mid-market activity.

This report is divided into four sections: the first includes

survey results and analysis on recent trends in global mid-

market M&A activity; the second spotlights mid-market deal

activity in the global Healthcare sector; the third focuses

exclusively on cross-border distressed M&A opportunities

in the mid-market; and the fourth and final section provides

historical data on global mid-market M&A activity.

As is to be expected in today’s climate, respondents are

largely uncertain about global M&A activity in the immediate

future. But this uncertainty is coupled with a sense of

optimism that was largely absent from last year’s survey:

in November 2008, the largest percentage of respondents

(44%) expected a decrease in cross-border mid-market deals,

but the largest percentage of respondents this year (40%) are

expecting to see an increase.

While there is no overwhelming majority opinion concerning

mid-market cross-border deal flow in the upcoming year,

there is some consensus on what the major drivers will

be. Respondents consistently cite unusually low valuations

as a major stimulus for mid-market activity, as a substantial

amount of mid-market targets are being sold off by larger

parent companies in need of capital. Indeed there are

many distressed M&A opportunities for both strategic and

financial buyers.

Focusing specifically on the Healthcare sector, the largest

group of respondents (39%) cite global competition as the

leading driver of mid-market M&A. While recent large-cap

mergers tend to dominate the headlines, mid-market deals

are in fact more common to this industry. With no shortage

of mid-sized targets and also no shortage of companies with

the desire and the means to expand via M&A, the sector’s

mid-market is well positioned for an increase in deal activity

in the upcoming year. These and other issues are analyzed in

detail in the Spotlight on Healthcare included in this report.

This edition of The Cross-Border M&A Reporter looks

beyond basic M&A trends to the specific lingering effects of

the financial crisis. Financing difficulties and opportunities

arising from the current turmoil are two key issues examined

by respondents: 81% of respondents expect deals to be

funded by cash and 65% of respondents expect the Financial

Services sector, arguably the most dramatically impacted

by the downturn, to generate the highest volume of

restructuring-related M&A activity this year.

This report is published to coincide with the Global M&A

conference held in Paris in May 2009. As the world’s leading

partnership of independent mid-market M&A advisory firms,

Global M&A is directly involved in more than 40 of the

world’s major economies. The professionals of our partner

firms have unmatched region and sector expertise. We

continuously update our shared knowledge of trends, values

and prospects, and we deliver the very highest levels of

service to the middle-market for both buy-side and sell-side

participants. For more information on Global M&A and its

partner firms, please visit us at www.globalma.com.

MethodologyFor this report, mergermarket canvassed the views of private

equity professionals and corporate executives focused on

M&A transactions in the mid-market (enterprise value of

between €30m and €300m). The aim of the survey was to

garner perceptions and expectations on global mid-market M&A

activity with a focus on the Healthcare sector. Fifty telephone

interviews were conducted in April 2009 among buyout

professionals and corporate executives in Europe and the US.

Responses were analyzed by mergermarket, and provided to

Global M&A anonymously and in aggregate.

4

Introduction

The lingering effects of the financial crisis continue to influence cross-border M&A activity in the mid-market space. Both the value and volume of deals have been hit globally. For example, Europe saw the value of deals drop from 318 in Q1 2008 to 108 in Q1 2009. Similarly, deal activity decreased in Asia from 210 to 129 in the same timeframe. Deal value also took a hit - North

America aggregated €23.6bn worth of deals in Q1 2008, and

only €10.2bn in Q1 2009, while Latin American values fell from

€3.7bn to €2bn. The drop in value and volume is not unexpected – due to a combination of financing difficulties, an uncertain valuation climate and an equally uncertain regulatory landscape, most deal makers have come to expect significantly lower activity levels than those of the years leading up to the financial crisis. Nonetheless, respondents to this survey are generally hopeful that the mid-market will see a fair share of cross-border M&A this year, as there is no shortage of deal drivers to stimulate activity over the next 12 months. In the November 2008 edition of this report, less than a quarter

of respondents (23%) were expecting an increase in their

country’s mid-market M&A activity and the largest percentage

of respondents (44%) expected a decrease. This year’s survey

reveals a noticeably rosier forecast: respondents are divided

almost equally into thirds, with the largest percentage (40%)

expecting an increase, 30% expecting a decrease and 30%

expecting their country to see no change in activity.

Many respondents expect activity levels to vary over the

course of the year. Several private equity respondents, for

example, are bracing for an increase in mid-market M&A

toward the end of this year. One such respondent from the UK

expects activity to plateau in 2009 and increase in early 2010,

while a respondent from the Netherlands explains: “There will

continue to be low activity for the first six months of the year,

followed by a slight increase in the six months following.”

A respondent from Turkey, whose firm is already involved in

several asset sales, believes activity will “definitely increase in

the second half of 2009” as companies’ asset sales continue.

Trends in mid-market M&A activity

Mid-market M&A trends: volume

Mid-market M&A trends: value

0

50

100

150

200

250

300

350

400

450

Q12009

Q4 2008

Q3 2008

Q2 2008

Q12008

Q4 2007

Q3 2007

Q22007

Q12007

Q4 2006

Q3 2006

Q22006

Q12006

Q42005

Q3 2005

Q2 2005

Q12005

Volu

me

of

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Europe North America Asia Latin America

Significantly increase

Increase

Decrease

Significantly decrease

Remain the same

37%

0%

30%

30%

3%

Expectations for mid-market M&A

0

5,000

10,000

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Valu

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(€

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Q12009

Q4 2008

Q3 2008

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Q3 2007

Q22007

Q12007

Q4 2006

Q32006

Q22006

Q12006

Q42005

Q3 2005

Q2 2005

Q12005

5


Respondents’ forecasting for outbound activity in their

respective countries follows a similar pattern to their

expectations for overall mid-market activity, again with the

largest percentage expecting an increase. 35%, 33% and 32%

respectively expect outbound activity to increase, decrease

and remain the same over the next 12 months. Respondents

are slightly more expectant of an inbound M&A increase,

however, with only 12% expecting a decrease and almost

half (48%) expecting an increase, up from 36% of respondents

answering this same question last year. Looking more closely at

this forecast, respondents seem to feel their domestic markets

will offer an abundance of attractive targets ranging from family-

owned businesses to public company divestitures (see below).

As one respondent explains, foreign targets, no matter the size,

will remain attractive to foreign buyers looking for a stepping

stone into new markets: “Family businesses are small, yet lean

and professional. Larger public companies will be attractive

when a company seeks to enter a new geographical area and

wants a good solid base as a starting point.”


Increase

Decrease


Remain the same

45%

10%

2%

40%

3%


Increase

Decrease


Remain the same

35%

26%

7%

32%

0%

Outbound M&A expectations

Inbound M&A expectations

Cross-border mid-market activity

0

5

10

15

20

25

30

35

40

Divestments frompublic companies

Public companiesPrivate equityportfolio companies

Private companiesand/or familybusinesses

Per

cen

tag

e o

f re

spo

nd

ents

34

22 22 22

Targets

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

MiddleEast

LatinAmerica

Central &EasternEurope

Asia-PacificUS/CanadaWesternEurope

Att

ract

iven

ess

of

cou

ntr

y/re

gio

n

3.82 3.80 3.55 3.52 2.842.88

Regions


6

Another source of global mid-market deal activity will come

from asset managers. Though many have been severely

bruised by the financial crisis, certain asset managers are

expected to cash in on mid-market opportunities this year:

46% of respondents expect private equity to be the most

active asset managers in the mid-market this year, closely

followed by 40% of respondents who expect to see sovereign

wealth funds as most active.

Interestingly, these expectations are hinged on the fact that

SWFs and private equity firms have specific advantages over

their hedge fund and venture capital peers. Respondents

from the US frequently note that private equity firms have

far more capital on hand than hedge funds. According to one

such respondent, private equity has “less liquidity and more

investment constraints” and is therefore well positioned

to remain active even in a difficult financing environment.

The same can be said for SWFs: respondents from the US,

Canada and Italy refer specifically to these funds’ access

to fresh capital as the reason they are able to overstep the

financing challenges facing other private sector players.

More so than any other region, the US and Canada combined

are expected by the majority of respondents (51%) to see the

highest volume of mid-market deals resulting from Financial

Services turmoil. Western Europe follows with approximately

a third of respondents (32%). Respondents from various

geographic backgrounds believe banks in these regions,

weighed down by toxic assets and government debt loads,

will facilitate mid-market M&A activity by selling off their

businesses to raise capital.

Asset managers’ activity

Private equity

Sovereign wealth funds(SWFs)

Venture capital

Hedge funds46%

40%

9%

5%US/Canada

Western Europe

Central & Eastern Europe

Asia-Pacific

Latin America

Middle East51%

32%

12%

5% 0%

0%

Financial Services opportunities


From a regional perspective, respondents give positive ratings

to nearly all corners of the globe in terms of the mid-market

opportunities they will offer. Western Europe, the US and

Canada are rated highest, followed by the Asia-Pacific and

Central & Eastern Europe. This marks an important shift from

last year, when the US and Canada received the lowest rating

and the Asia-Pacific region received the highest. As was the

case last year, however, respondents expect to find fewer

opportunities in Latin America and the Middle East this year than

in other regions. This could be due to the perceived risk of doing

deals in emerging markets, according to a corporate respondent

from Germany who does not expect to find opportunities in

these “very risky” markets.

7



In keeping with respondents’ forecasts and commentary in the

previous questions, the Financial Services sector is expected

to see more restructuring-related mid-market M&A than any

other sector this year, according to 65% of respondents. The

Consumer space was chosen by the second highest group of

respondents, represented by a comparatively low 35%, which

highlights just how heavily influential the Financial Services

space is expected to be this year in terms of its contribution to

overall mid-market M&A activity.

Sharpening the focus to specific Financial Services subsectors,

the majority of respondents (54%) expect asset managers

like private equity and hedge funds to see the highest level

of consolidation. One UK based respondent from the asset

management industry explains: “There are too many asset

managers around, and as investors will want to reduce fees

and costs, asset managers will also have to merge to reduce

costs.” A similar driver is expected to fuel mid-market M&A

among Consumer banking businesses, which was chosen by

38% of respondents. A private equity practitioner based in the

US explains: “There has been such major expansion in retail

banking that consolidation is now required.”

Other respondents point out that mid-market targets will

be found in all corners of the Financial Services sector, as

there are opportunities in every subsector where healthy but

affordable targets can be found. A respondent from the US

explains the appeal of any business in the industry that “won’t

be dragged down by poor balance sheets, and can create long-

term value.” A Germany based corporate respondent expects

mid-market activity to span all subsectors for another reason:

“All of these areas will see consolidation. Financial institutions

cannot sustain profitability now, and will need to divest and

separate functions.”

0

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40

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Financial Services subsectors

Sector-specific activity

8

In the end, no deals can be done without financing, which

unfortunately seems harder to come by than ever before.

In the wake of dried up credit markets, respondents are

expecting to see a new mid-market M&A climate where

dealmakers are far less reliant on debt than on capital.

An overwhelming 81% of respondents expect cash to be

the major source of deal financing in the upcoming year,

while bank debt, not surprisingly, is cited by only 14% of

respondents as a likely financing source. Stock and

mezzanine debt were each cited by nearly a quarter of

respondents (24%).

While the forecasted reliance on cash speaks directly to the

ongoing effects of the credit crisis, this forecast also shows

that the global M&A community as a whole is changing its

strategy to fit the new climate. Overall, respondents show a

great deal of optimism that the mid-market, with attractively

priced targets and exceptional cross-border opportunities for

buyers in all regions, will continue to survive the downturn in

M&A activity.

0

10

20

30

40

50

60

70

80

90

Bank debtMezzanine debtStockCash

Per

cen

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81

24 2414

Deal financing

Conclusion


9


Introduction

Large-cap consolidation of the world’s leading drug companies

has placed the Healthcare sector in the spotlight, and for good

reason. In the first three months of 2009, the US$47bn hostile

takeover of biotechnology company Genentech Inc. by its

Switzerland based majority owner Roche Holdings, coupled with

the US$64bn merger of pharmaceutical giants Pfizer and Wyeth

and the US$43bn merger of Merck & Co. and Schering-Plough

Corporation, propelled 2009 deal values far above last year’s total

of US$79bn, which represents 349 deals.

These mergers’ influence on aggregate deal value is especially

impressive in the current M&A market, where a drop in value is

common to all industry sectors. But deals of the Pfizer-Wyeth

variety are likely to have a more lasting impact on their smaller,

mid-sized peers. In this edition of The Cross-Border M&A Reporter, the largest percentage of corporate respondents

(39%) expect cross-border deals in the Healthcare sector to be

driven primarily by large-cap consolidation, which has already

heightened the competition among mid-market players.

Spotlight on the Healthcare sector

This trend is in fact already emerging: the same global

leaders involved in the year’s blockbuster transactions have

been and continue to be active mid-market players. Roche

has made 10 strategic acquisitions since the start of 2008,

spanning the UK, Canada, Germany and Japan, but apart

from its US$47bn acquisition of Genentech and its US$922m

investment in Chugai Phamaceutical Co., none of these deals

exceed US$160m in value. Likewise, Merck’s recent US$43bn

acquisition of Schering-Plough is far from the buyer’s normal

price range: its largest acquisition in 2008 totaled just US$20m.

It is unlikely that either of these companies will scale back

their mid-market activity any time soon, judging by recent

transactions: in the beginning of 2009, Roche announced its

US$19m acquisition of Germany based cell analysis company

innovatis AG and Merck recently announced its US$130m

acquisition of US based Insmed Incorporated’s biologics

portfolio, purchased through its Protein Transaction affiliate.

America’s healthy appetite for international acquisitions

The aforementioned examples are only a few of the recent

mid-market deals driven by extreme competition, where

the desirability of mid-sized targets rests in their potential to

expand the buyer’s geographic reach, its drug portfolio or its

product offerings. These features have encouraged Healthcare

businesses of all sizes to look past their borders for strategic

add-on acquisitions that can open doors to new markets.

Nowhere is the focus on global expansion more pronounced

than in the US, where a string of Healthcare deals kicking off

2009 are driven by strong growth incentives.

When US based Nanogen, a vitro diagnostics company

focused on the gene testing market, wanted to step up its

global commercial operations, the company used strategic

M&A to enter foreign markets. Nanogen announced its

US$99m acquisition of The Elitech Group, a French vitro

diagnostics company, in August of 2008. The deal allows

Nanogen to access Elitech’s wide distribution network in

Europe, and gives Nanogen access to a brand new product

portfolio.

US based ConvaTec, an ostomy and wound care product

company owned by Nordic Capital and Avista Capital Partners,

both Sweden based buyout firms, made a similar move by

purchasing Denmark based Unomedical AS for US$207m. As

with Nanogen’s acquisition, the deal opened the door into new

markets for the bidder and allowed the combined entity to

widen its product portfolio and expand its operation of scale.

Perrigo Company, a US manufacturer of over-the-counter

pharmaceuticals and nutritional products, also had a busy 2008

announcing the acquisition of four pharmaceutical companies.

While two of these were domestic purchases, the acquisitions

of UK based Galpharm International Limited for US$86m, and

Mexico based Laboratorios Diba S A for US$25m illustrates

their strong commitment to global expansion.

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Drivers of Healthcare sector M&A

10

Spotlight on the Healthcare sector

The appetite for international acquisitions is not exclusive to

the US. Outbound deals from Asia are seeing the same trend.

In January of 2008, Daiichi Sankyo Co Ltd, the listed Japan

based pharmaceutical company, agreed to acquire U3 Pharma

AG, the Germany based biotechnology firm, for US$234.7m,

in a deal that was aimed at beefing up Daiichi Sankyo’s

oncology portfolio.

Western Europe is also generating its fair share of mid-

market activity. In September of 2008, Germany based

pharmaceutical giant Bayer HealthCare AG agreed to acquire

Direvo Biotech AG, a German biotechnology company, from

a consortium of venture capitalists and private investors, for

€210m in cash. Though the transaction is a domestic one,

the outcome of the deal illustrates the global nature of the

industry. The deal allows Bayer Schering Pharma to create

its own biologic expertise center along with the global R&D

centers in Berlin and Wuppertal in Germany, and another

in Berkeley, California in the US. The merger also helps

Bayer HealthCare to integrate the target’s R&D staff into

Bayer Schering Pharma’s global drug discovery organization.

Ultimately, Bayer HealthCare’s aim is similar to that of busy US

bidders: for Bayer, strategic M&A was an avenue for growth

in a specialized market (in this case, the protein engineering

market).

France’s Sanofi-Aventis has also had an active 2009. In

April, it announced the purchase of Medley, the Brazil based

pharmaceutical company with a strong focus on generic

drugs, for €500m. The acquisition is in line with Sanofi-

Aventis’ strategy to build growth platforms, accelerate sales

and further extend its pharmaceutical portfolio in emerging

markets. Continuing its global expansion, just a week later,

Sanofi purchased BiPar Sciences Inc, the US based bio

pharmaceutical company, for an undisclosed amount. Drivers

of the deal include Sanofi’s desire to strengthen its oncology

R&D portfolio.

Research, development and market share

The Bayer-Direvo and Sanofi-BiPar deals highlight one

of the most fundamental drivers of consolidation in the

Healthcare space, which is the industry’s reliance on

innovation and development. With the constant, high-stakes

drug development process, biotechnology firms, which

are often dedicated to research in specialized areas, can

create extremely attractive opportunities for buyers who are

constantly racing against their competitors.

In fact, R&D is so vital that buyers often build incentives

into the deal based on the target’s success in R&D. Just last

April, Switzerland based Roche Holding AG acquired Piramed

Limited, the UK based biotech company, from US based

Panorama Capital and UK based Merlin Biosciences Limited,

both private equity firms. The deal was valued at US$160m—a

deal that Roche hoped would strengthen its research and

development (R&D) in the areas of oncology, inflammatory

diseases and further its research of diseases like rheumatoid

arthritis. But interestingly, this figure excludes milestone

payments of €9.49m (US$15m), which are dependent upon

the commencement of phase II clinical trials for Piramed’s

oncology program.

Similarly, Wyeth Pharmaceuticals’ US$43m acquisition of UK

based biopharmaceutical company Thiakis Limited, announced

in December, had a flexible price tag with additional

payments of up to about US$120m depending upon the

target’s achievement of certain development milestones. The

transaction, which is in line with Wyeth’s strategy to develop

and commercialize new therapies for obesity, only further

highlights the high premium placed on R&D.

Going forward

Deals in this industry span an extremely wide price range,

and an even wider range of targets which focus on everything

from drug development to equipment manufacturing. But

if there is one underlying thread uniting large cap and mid-

market activity, it is the fierce competition behind buyers’

spending habits. While deal activity seems to have fallen

universally, there are plenty of vital signs in the Healthcare

industry, which is crowded with attractive targets and fiercely

competitive bidders—a formula for M&A activity going

forward.

11


Introduction

With bankruptcy filings on the rise and the global 12-month

trailing speculative-grade default rate currently at 4.28%,

distressed M&A will probably continue to offer an abundance of

opportunities for both financial and strategic bidders over 2009.

Distressed deals over the past year have generally occurred in

sectors where restructuring initiatives have been widespread,

which is why industries that are arguably most in need of repair

– such as the Financial Services, Consumer, Real Estate and

Automotive spaces – are turning out to be excellent sources of

distressed opportunities.

Distressed M&A in the mid-market

In the past, asset sales have been driven mostly by a

company’s desire to sell off non-core operations and focus on

its fundamental competencies. However, since the onset of the

global financial crisis, companies have been forced to sell assets

in order to fight off bankruptcy, or as ordered by the bankruptcy

courts. As a result, the sense of urgency surrounding distressed

asset sales is driving down prices to extremely attractive levels

and bidders from across the globe are, not surprisingly, starting

to take advantage of this. While a good deal of mid-market

distressed acquisitions tend to be purely domestic plays, foreign

bidders’ interest in this particular market seems to have grown

over the past year as distressed buys can provide a window into

new markets and establish a global presence.

Bankruptcies have provided a major boost to distressed asset

sales globally, as highlighted by the recent surge in takeover

activity in the world’s most troubled industries. A significant

number of manufacturers and retailers in the US Automotive

industry, for example, have filed for bankruptcy and hence,

immediately transformed themselves into distressed targets for

international competitors. One such firm, US parts manufacturer

Delphi, filed for bankruptcy as far back as 2005 and is still

struggling to recover by selling off its non-core operations.

The latest development – in March 2009 – saw Chinese firm

Beijing West Industries acquire Delphi’s suspension and brakes

business for US$100m. This particular Delphi business is just

one of the many operations the company plans to shed in its

ongoing efforts to emerge from bankruptcy but is notable for

its unique mix of bidders: Beijing West Industries is in fact a

consortium of Chinese buyers including The Shougang Corp,

which acquired 51% of the business, auto supplier Tempo

Group, which acquired 24%, and the Chinese government,

which took the remaining 25%.

Cross-border mid-market distressed M&A

Strategic buyers are hardly alone in their search for distressed

businesses in the Automotive space. In March, US private

equity firm TowerBrook Capital Partners announced its plans

to acquire Autodistribution, a French automotive components

retailer, for US$138m. The appeal of the target probably rested

in its steeply-discounted price tag: TowerBrook acquired the

businesses in a secondary buyout transaction from Investcorp

SA, the listed Bahrain based investment group which bought

Autodistribution for approximately US$850m in 2006.

The Financial Services sector has seen its fair share of turmoil

over the past year as well. However asset sales in the sector

are often large-cap transactions, the sale of Citigroup’s

German retail unit, Citibank Privatkunden, to Credit Mutuel of

France for just over US$8bn last year being a prime example.

Nonetheless, the global financial crisis has unearthed several

less expensive targets. In January, bankrupt US investment

bank Lehman Brothers sold certain equity, investment, advisory

and management interests of its Lehman Brothers Merchant

Banking Partners arm in an MBO for approximately US$20m.

Under the terms of agreement, Lehman’s management paid

US$10m for a 51% stake in the funds and Reinet Fund, the

investment fund of Luxembourg based Reinet Investments,

purchased the remaining 49% and also agreed to commit US

$230m to existing and new investments in the funds over the

remaining three and a half year investment period.

Indeed, as in the Automotive space, a bankruptcy can be a major

catalyst for mid-market deal activity in the Financial Services

sector. Though a lower-profile target than Lehman, BearingPoint,

a US management and technology consultancy firm, further

demonstrates the appeal of distressed companies, as it has

drawn plenty of international interest and generated a total of

three deals so far this year. As part of its restructuring process,

the company sold off some of its businesses to global strategic

buyers: in April, Japan’s PwC Advisory Co. Ltd. acquired

BearingPoint’s Japanese consultancy unit for US$45m in cash,

closely followed by the UK arm of PricewaterhouseCoopers bid

to acquire BearingPoint’s North American Commercial Services

business for US$25m. The previous month, PwC competitor

Deloitte Touche Tohmatsu agreed to acquire the Public Services

unit of BearingPoint for US$350m.

The Consumer sector is yet another industry that offers

attractive mid-market opportunities to foreign buyers. The

industry has suffered considerably from the global downturn,

albeit less severely than the Automotive or Financial Services

sectors, and a host of international companies have been

12

Cross-border mid-market distressed M&A

drawn to distressed Consumer businesses, especially those

with globally recognizable brands. And while many assets have

ultimately sold to domestic bidders, there is often a strong

presence of foreign bidders throughout the auction process.

The auction leading up to the sale of bankrupt consumer

electronics and camera manufacturer Polaroid was hardly

a straightforward one: the foremost contender was at first

Luxembourg based Genii Capital SA, a private equity firm

which created an acquisition vehicle, PHC Acquisitions LLC,

to acquire the company for US$42m. The Luxembourg based

party was the frontrunner at the start, though the initial bid saw

a substantial amount of criticism from third parties who argued

the company’s intellectual property rights alone were worth that

much. Polaroid, in the end, was purchased by two domestic

bidders – a consortium of financial buyers including Gordon

Brothers Group, Hilco Consumer Capital and Knight’s Bridge

Capital Partners – for US$85.9m in equity and cash.

The final selling price covers Polaroid’s intellectual property

rights, its brand name and its inventory, among other assets,

and ultimately more than doubled the original stalking horse

offer. The competitive and complicated auction process, and

the significant uptick in deal value over the course of the

auction, is a testament to the attractiveness of Consumer

companies and bidders’ willingness to invest in internationally-

recognized targets.

There are other recent cross-border deals that initially looked

like domestic transactions but in fact involved several

international parties. For example, just this month, German

brake manufacturer TMD Friction sold out to its management

team in a US$135m deal backed by UK venture capital firm

Pamplona Capital. Furthermore, throughout the course of the

auction process, TMD attracted interest from several prominent

strategic and financial bidders, both foreign and domestic,

including German private equity firm Orlando Management

GmbH and US parts supplier Federal-Mogul Corp. In a similar

vein, the sale of French designer clothing retailer Morgan

International, which went into administration in December of

2008, to its French competitor Groupe Beaumanoir, for US$27m,

was in fact a cross-border transaction because the seller, private

equity group Apax Partners, is based in the UK.

Conclusion

As the year continues, the ripple effects of the global downturn

will probably uncover more distressed mid-market targets

spanning across all industries and geographies. There are

already new opportunities emerging in industries characterized

by rising volumes of bankruptcy filings. Automotive companies

continue to file for insolvency, with German automotive supplier

Edscha currently mulling over its sale options after being forced

into insolvency in March. Edscha’s competitors, Karmann and

Webasto, have roughly similar market shares and are facing the

same issues as their failed counterpart.

Further adding to the list of potential distressed targets

are airlines and airports. At the moment, the UK’s Bristol

International Airport is in the midst of its sale process, and is

reportedly seeing interest from Belgian bank Fortis. If or when

the sale of the airport is finalized, it will most likely add yet

another distressed mid-market deal to the list as the target’s

estimated value in 2006 was roughly US$423m – a valuation

which is unlikely to be achieved in the current market climate.

Another airline, Air Jamaica, which has lost US$150m over the

past year, is expecting sale talks to move along rather quickly

now that an international airline has expressed interest in buying

the company.

Likewise, the Real Estate market volatility is revealing its own

distressed opportunities from companies like the US based

Forestar Group, which is looking to sell thousands of acres

of land that may appeal to both financial and strategic foreign

bidders. Even a sale to institutional investors is a possibility – this

scenario would be unusual but not unprecedented, as Danish

pension fund ATP Timberland purchased US$32.8m worth of

land from US based RMK Timberland Group in March 2009.

The current drivers of distressed M&A activity – insolvency

filings and urgent capital-raising initiatives – clearly remain intact

across a variety of sectors worldwide. And new potential drivers

are emerging at the same time: changes to the global regulatory

environment may be a crucial factor in allowing more chances

for financial buyers, particularly sovereign wealth funds, to

enter the distressed M&A mix. In addition, if the Committee on

Foreign Investment in the United States does indeed relax some

of its strict standards, as is expected, the upcoming year may

see even more foreign bidders enter the already-competitive

auction processes for distressed assets. Given the widespread

suffering of both mid-market and large-cap companies, the

healthy M&A appetite of foreign buyers and the overall increase

in current and potential distressed M&A activity, there is a strong

possibility that distressed deals in the mid-market will be more

cross-border than domestic over the remainder of the year.

13


Historical M&A Analysis

Inbound cross-border mid-market M&A trends: volume Inbound cross-border mid-market M&A trends: value

0

20

40

60

80

100

120

140

Volu

me

of

dea

ls


Q12009

Q4 2008

Q3 2008

Q2 2008

Q12008

Q4 2007

Q3 2007

Q22007

Q12007

Q4 2006

Q3 2006

Q22006

Q12006

Q42005

Q3 2005

Q2 2005

Q12005

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

Valu

e o

f d

eals

(€

m)

Q12009

Q4 2008

Q3 2008

Q22008

Q12008

Q4 2007

Q3 2007

Q22007

Q12007

Q4 2006

Q32006

Q22006

Q12006

Q42005

Q3 2005

Q2 2005

Q12005


Mid-market M&A trends: volume Mid-market M&A trends: value

0

50

100

150

200

250

300

350

400

450

Q12009

Q4 2008

Q3 2008

Q2 2008

Q12008

Q4 2007

Q3 2007

Q22007

Q12007

Q4 2006

Q3 2006

Q22006

Q12006

Q42005

Q3 2005

Q2 2005

Q12005

Volu

me

of

dea

ls


0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

Valu

e o

f d

eals

(€

m)


Q12009

Q4 2008

Q3 2008

Q22008

Q12008

Q4 2007

Q3 2007

Q22007

Q12007

Q4 2006

Q32006

Q22006

Q12006

Q42005

Q3 2005

Q2 2005

Q12005

14


Mid-market buyout trends in North America: volume and value

Mid-market buyout trends in Europe: volume and value

0

10

20

30

40

50

60

70

Q1 2009

Q4 2008

Q3 2008

Q2 2008

Q1 2008

Q4 2007

Q3 2007

Q2 2007

Q1 2007

Q4 2006

Q3 2006

Q2 2006

Q1 2006

Q4 2005

Q3 2005

Q2 2005

Q1 2005

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

Volu

me

of

dea

ls

Value o

f deals (€

m)

Volume of deals

Value of deals (€m)

0

20

40

60

80

100

120

Q1 2009

Q4 2008

Q3 2008

Q2 2008

Q1 2008

Q4 2007

Q3 2007

Q2 2007

Q1 2007

Q4 2006

Q3 2006

Q2 2006

Q1 2006

Q4 2005

Q3 2005

Q2 2005

Q1 2005

0

2,000

4,000

6,000

8,000

10,000

12,000

Volu

me

of

dea

ls

Value o

f deals (€

m)

Volume of deals


Mid-market buyout trends in Asia: volume and value

Mid-market buyout trends in Latin America: volume and value

0

5

10

15

20

25

30

35

40

45

Q1 2009

Q4 2008

Q3 2008

Q2 2008

Q1 2008

Q4 2007

Q3 2007

Q2 2007

Q1 2007

Q4 2006

Q3 2006

Q2 2006

Q1 2006

Q4 2005

Q3 2005

Q2 2005

Q1 2005

0

500

1000

1500

2000

2500

3000

3500

4000

Volu

me

of

dea

ls

Value o

f deals (€

m)

Volume of deals


0

1

2

3

4

5

6

7

8

9

10

Q1 2009

Q4 2008

Q3 2008

Q2 2008

Q1 2008

Q4 2007

Q3 2007

Q2 2007

Q1 2007

Q4 2006

Q3 2006

Q2 2006

Q1 2006

Q4 2005

Q3 2005

Q2 2005

Q1 2005

0

100

200

300

400

500

600

700

800

900

1,000

Volu

me

of

dea

ls

Value o

f deals (€

m)

Volume of deals


15



Energy, Mining & Utilities

TMT

Financial Services

Industrials and Chemicals

Pharma, Medical & Biotech

Business Services

Consumer

Leisure

Construction

Defence

Real Estate

Transportation

Agriculture

21%

14%13%

12%

9%

8%

15%

3%

2% 1%1% 1%

0.5%

Other



Financial Services

Consumer

TMT

Business Services

Real Estate

Construction


Transportation

Agriculture

Leisure

8%

8%

7%

7%

6%

3%

3%

49%

3%

2%2%

1%1%

TMT



Financial Services

Consumer


Business Services

Real Estate

Leisure

Transportation

Construction

Agriculture

18%

14%

11%

11%

7%

6%

16%

5%

4%4%

3%

1%


Financial Services

Consumer

Transportation


TMT

Business Services


Agriculture

Leisure

Real Estate16%

18%

7%

9%

7%

7%

4% 24%

4%

2%2%

Sector split of mid-market M&A in North America: volume (Q4 2008-Q1 2009)

Sector split of mid-market M&A in Asia: volume (Q4 2008-Q1 2009)

Sector split of mid-market M&A in Europe: volume (Q4 2008-Q1 2009)

Sector split of mid-market M&A in Latin America: volume (Q4 2008-Q1 2009)

16

Deal size split of mid-market M&A North America: volume (Q4 2008-Q1 2009)

Deal size split of mid-market M&A Asia: volume (Q4 2008-Q1 2009)

Deal size split of mid-market M&A Europe: volume (Q4 2008-Q1 2009)

Deal size split of mid-market M&A Latin America: volume (Q4 2008-Q1 2009)

€30m - €100m

€101m - €170m

€171m - €240m

€241m - €300m

20%

66%

10%

4%

19%

66%

9%

6%€30m - €100m

€101m - €170m

€171m - €240m

€241m - €300m

€30m - €100m

€101m - €170m

€171m - €240m

€241m - €300m

19%

62%

12%

7%

11%

66%

16%

7%€30m - €100m

€101m - €170m

€171m - €240m

€241m - €300m


17


Announced Date

Completed Date

Target Company Target Sector Target Country

Bidder Company Bidder Country Seller Company Seller Country

01-Oct-08 P Waltec Equipamentos Eletricos Ltda

Industrials, Chemicals and Engineering

Brazil AREVA T&D SA France

03-Oct-08 C Cenexi SAS Life Sciences and Healthcare

France Phinex France Roche Holding Ltd. Switzerland

03-Oct-08 C Metaca Corporation Consumer Canada CPI Card Group Inc USA Secured Products Intermediate Holdings SARL

Luxembourg

16-Oct-08 C Haemmerlin SAS Industrials, Chemicals and Engineering

France Duo SA France Haemmerlin family France

05-Nov-08 C Digitek SpA Industrials, Chemicals and Engineering

Italy MTA SpA Italy Selcom Elettronica SpA Italy

14-Nov-08 P Stallinger Swiss Timber AG (75.00% stake)

Agriculture Switzerland Mayr Melnhof Holz Holding AG

Austria Franz Stallinger (Private Investor); Leopold Stallinger (Private Investor)

Austria; Austria

15-Nov-08 C Ciesa Contratistas Generales S.a.c

Construction Peru Private Investor Group

Peru

30-Nov-08 C Geoplast S.A. Industrials, Chemicals & Enineering

Guatemala Polytec Central America Grupo Multinversiones Central America

16-Dec-08 C Minimold SpA Industrials, Chemicals and Engineering

Italy Emanuele Aseglio (Private investor)

Italy,Japan

22-Dec-08 C San Sac AB Industrials, Chemicals and Engineering

Sweden Priveq Investment III

Sweden

22-Dec-08 C The 3rd Man Group plc Financial Services UK Datacash Group plc

UK

02-Jan-09 P St. Ives (USA) Inc Industrials, Chemicals and Engineering

USA St Ives USA Acquisition Inc

USA St. Ives Plc United Kingdom

06-Jan-09 C Van Arkel Gerechtsdeurwaarders

Financial Services Netherlands DAS Legal Finance Netherlands

13-Jan-09 O XNET Corp (51.00% stake)

Technology Japan NTT DATA Corporation

Japan

14-Jan-09 C Rufener Events Ltd. Business Services Switzerland MCH Messe Schweiz (Holding) AG

Switzerland

16-Jan-09 C Laboratorios Synthesis SCA

Life Sciences and Healthcare

Colombia Laboratorios Recalcine S.A.

Chile

23-Jan-09 C Bauer Logistik Systeme GmbH & Co KG; HELL Gravure Systems GmbH & Co KG; Kaspar Walter GmbH & Co KG; MDC Max Daetwyler AG

Industrials, Chemicals and Engineering

Germany; Switzerland

Heliograph Holding GmbH

Germany Max Rid (Private Investor); Peter Daetwyler (Private Investor)

Germany; Switzerland

01-Feb-09 C STPM Consumer France Exacompta (Rolfax)

10-Feb-09 C Visual Physics Industrials, Chemicals & Engineering

USA Crane & Company, Inc.

USA Nanoventions Holdings USA

16-Feb-09 C Tenova Bioplastics AB Life Sciences and Healthcare

Sweden Billerud AB Finland; Sweden Digero Forvaltning AB; Jaeger Invest AB; Kohler Invest AB; Patrik Larsson Invest AB

Sweden

26-Feb-09 C Laboratoires Phamaceutiques Poirier

Life Sciences & Healthcare

France Individual France

27-Mar-09 C Hapå Consmer Norway Kavli As Norway Nestle Norway As Norway

30-Mar-09 P Luxo ASA Consumer Germany 3i Group plc United Kingdom Quartus; SG Capital Europe Ltd

United Kingdom

C = Completed; P = Pending

Selected Global M&A Deals Q4 08 - Q1 09

18

Contacts – Global M&A

ArgentinaColumbus Merchant BankingAlejandro DillonTel: +(54 11) 4802 4700Email: [email protected]

AustraliaBeerworth & PartnersBill BeerworthTel: +61 2 9259 0000Email: [email protected]

AustriaCD Invest ConsultHarald KlienTel: +43 1 99 00 220 0Email: [email protected]

BelarusUNITER Investment CompanyVladimir VassilevskiTel: +375 17 385 24 62Email: [email protected]

BelgiumM&A InternationalBenoit RooseTel: +32 2 627 51 21Email: [email protected]

Bosnia-HerzegovinaCD Invest ConsultMartina SumanTel: +387 (33) 207 087 Email: [email protected] BrazilAmati Negócios InternacionaisAntonio Toffoli BaptistaTel: +55 51 3328 1900Email: [email protected]

Vergent PartnersCelso de BarrosTel: +55 11 3053 0483Email: [email protected]

CanadaSynergis CapitalAllison DentTel: +1 514 845 1079Email: [email protected]

Central AmericaIDC Asesores FinancierosLuis DavidTel: +502 2363 1808Email: [email protected]

ChileBanmerchantAgustin Larrain CampbellTel: +56 2 580 6066Email: [email protected]

ChinaSolveigh Corporate DevelopmentErnst Jan KruisTel: +31 10 238 18 00Email: [email protected]

ColombiaNogal Asesorías FinancierasMiguel CortésTel: +57 (1) 644 9400Email: [email protected]

Czech RepublicCorsum GroupAdam BlechaTel: +420 224 934 707Email: [email protected]

Denmark Nordic Corporate FinancePeter SogaardTel: +45 36 11 09 24Email: [email protected]

EstoniaSP NavitasJohann SullingTel: +372 681 3684Email: [email protected]

FinlandAventum PartnersAntti KemppainenTel: +358 9 6850 2230Email: [email protected]

FranceFinancière de CourcellesJean-Marc MetzgerTel: +33 1 43 59 03 94Email: [email protected]

GermanyInterFinanzXaver ZimmererTel: +49 211 16802 19 Email: [email protected]

GCC & YemenFinancial Transaction HouseFaisal AlsayrafiTel: +966 2 6573030Email: [email protected]

HungaryInvescom Corporate FinanceZoltán SiklósiTel: +361 275 1116Email: [email protected]

IcelandKontaktBrynhildur BergthorsdottirTel: +354 414 1200Email: [email protected]

IndiaMeghraj SP Corporate FinanceSandeep OgaleTel: +91 (0)22 6744 5100Email: [email protected]

IrelandCFM CapitalPatrick SheehanTel: +353 1 449 4436Email: [email protected]

IsraelAE Capital AdvisorsYair EphratiTel: +972 3 516 7878Email: [email protected]

ItalyCross BorderNuccia CavalieriTel: +39 02 782 138Email: [email protected]

JapanRECOF CorporationTamotsu MajimaTel: +81 3 3221 4930Email: [email protected]

LatviaPrudentiaAleksandr LobakovTel: +371 67 212 324Email: [email protected]

MexicoPablo Rión y AsociadosSaúl VillaTel: +52 1 (55) 55 20 31 44Email: [email protected]

NetherlandsSolveigh Corporate DevelopmentErnst Jan KruisTel: +31 10 238 18 00Email: [email protected]

NorwaySaga Corporate FinanceIvan AlverTel: +47 24 14 54 60Email: [email protected]

PeruMacroconsultRóger EspinosaTel: +511 702 2590Email: [email protected]

PolandHexagon Capital AdvisorsRafal NowakowskiTel: +48 22 696 32 41Email: [email protected]

RussiaMeridian CapitalMarina EvansTel: +7 495 937 5933Email: [email protected]

SerbiaCD Invest ConsultVelimir GavrilovicTel: +381 (11) 2185 999 Email: [email protected]

SloveniaCD Invest Consult Franz WeberTel: +386 (1) 241 4780 Email: [email protected]

SpainSocios FinancierosNicholas WalkerTel: +34 91 308 30 37Email: [email protected]

SwedenArctos Mergers & AcquisitionsThomas KarlssonTel: +46 8 782 93 13Email: [email protected]

SwitzerlandZetra International AGFrédéric de BoerTel: +41 44 7555 999Email: [email protected]

TurkeyTotal FínansMetin BonfilTel: +90 212 275 0175Email: [email protected]

UkraineSokratVlad OstapenkoTel: +38 044 207 01 00Email: [email protected]

UKNoble & CompanyDaniel ConfinoTel: +44 20 7763 2207Email: [email protected]

USABrown Gibbons Lang & CompanyMichael GibbonsTel: +1 216 241 2800Email: [email protected]

USA - Lower Middle MarketMeridian Capital, LLCChuck WilkeTel: +1 206 224 6151Email: [email protected]

For further information on Global M&A, please visit our website at www.globalma.com

18


19

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other service of its kind, mergermarket provides a complete

overview of the M&A market by offering both a forward-

looking intelligence database and an historical deals database,

achieving real revenues for mergermarket clients.

Global industry expertise

Global M&A’s multinational teams support seamless cross-

border cooperation on specific M&A projects in the following

organized industry sectors:

1. Automation, Controls and Electrical Products (ACE)

2. Automotive and Industrial Products (AIP)

3. Business Services

4. Chemicals

5. Consumer Products

6. Financial Services & Insurance Group (G-FIG)

7. Food & Beverage

8. Healthcare & Pharmaceuticals

9. Leisure & Retail

10. Marketing, Media and Entertainment

11. Packaging (G-Pack)

12. Technology/IT Industry (G-Tech)

Please visit www.globalma.com to learn more about our

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Any queries regarding this publication or the data within should

be directed to:

Erik Wickman Regional Director, Remark Tel: +1 212 686 3329 [email protected]

Notes

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Documents

The Cross-Border M&A Reporter - Livingstone · 2018. 11. 7. · cross-border M&A activity in the mid-market space. Both the ... SWFs and private equity firms have specific advantages