New study reveals cross-border growth, the rise of Asia-Pacific bidders, continued strength of the mid-market
Global legal practice Squire Sanders, in association with mergermarket, a leading independent and proprietary mergers and acquisition (M&A) intelligence service, today released a study of worldwide M&A activity in the industrials and chemicals sector through the first quarter 2012, showing a marked rebound in dealmaking activity with deal value reaching its highest level since 2007.
The study, second in a series of three reports on global M&A activity, provides a comprehensive review of dealmaking trends and includes analysis of the industrial products and services, diversified industrials, chemicals and materials, automotive and manufacturing industries subsectors.
“The findings in this report parallel what Squire Sanders has been experiencing with our clients,” said William Downs, global leader of Squire Sanders’ Corporate Transactions, Finance and Governance Practice Group. “M&A deals are becoming more and more complex and more global. There’s a clear trend toward internationalization of business, particularly with the rise of Asia-Pacific bidders, and alongside the handful of mega-deals there’s a strong and vibrant mid-market, with small and mid-sized enterprises (SMEs) underpinning the sector globally.”
Data in the report reveal that 42 percent of all announced deals last year were cross-border in nature, nudging up from 40 percent in 2010. Additionally, aggregate deal value hit US$345.7 billion, the highest since 2007, with transactions in the range of US$15 million - US$100 million comprising two-thirds of all deals announced. Asia-Pacific finally overtook Europe as the second most important bidder market after North America.
“Diversified industrials are responding to global volatility by pursuing M&A strategies that broaden their geographic coverage and reduce their reliance on any one particular market,” said Cipriano S. Beredo III, partner and global Diversified Industrials Industry Group leader at Squire Sanders. “Businesses are looking to continue expansion beyond their own borders and we expect this trend to continue through 2012.”
The report also spotlights the chemicals and materials subsector and reveals that M&A activity increased by 16 percent in volume and 56 percent in value, with private equity buyouts accounting for roughly US$6.7 billion, up 34 percent in volume and 56 percent in value from 2010.
“Chemicals and materials is one of the more cyclical industry sectors,” said Carolyn J. Buller, partner and global Chemicals Industry Group leader at Squire Sanders. “After the deal trough in 2009, M&A dealmaking in chemicals and materials has recovered steadily. We expect the sector to grow further in 2012, with corporate disposals and private equity exits as key drivers of this activity.”
Snapshot of industrials and chemicals global M&A activity 2011-2012:
- Global M&A in the industrials and chemicals sector in 2011 reached its highest yearly level of aggregate deal value (US$345.7 billion) since 2007
- Number of transactions (60) valued at US$1 billion or greater rose to the highest level in four years
- Buyouts and exits were up, 48 percent and 30 percent, respectively from 2010
- Private equity buyouts accounted for nearly one-fifth (18 percent) and more than one-tenth (11 percent) of exits of all announced M&A deals
- The Asia-Pacific region surpassed Europe to become the second largest bidder market after North America, accounting for a 29 percent share of global industrials and chemicals M&A activity
- Western Europe remained the top target region for industrials and chemicals transactions globally, with two in every five mergers and acquisitions taking place in the region
- Western Europe continued to host the most activity in the manufacturing space, accounting for 40 percent of the 382 deals transacted globally in 2011, with small and mid-cap deals predominating
- Deal flow in the automotive subsector rose by more than 20 percent from 2010 to 2011, to reach 345 deals worth US$31.3 billion
- The Asia-Pacific region led dealmaking activity in the industrials electronics niche, accounting for 37 percent of all activity and 41 percent of volume
- Private Equity activity deal flow in the industrial automation subsector was up 72 percent, accounting for a third of all dealmaking activity in that subsector last year, with a tripling in the number of secondary buyouts (SBO), compared to 2010.