Author: Gordon Platt

EMERGING MARKETS M&A; RISES SHARPLY

By Gordon Platt

Mergers and acquisitions involving companies in emerging markets more than doubled in the first quarter of 2010 compared to the same period a year earlier, reaching $183 billion, according to Thomson Reuters.


The largest deal was in the Mexican telecom sector. América Móvil offered to acquire Carso Global Telecom, the company that controls fixed-line operator Teléfonos de México, for $27.4 billion in a stock-swap transaction. Carlos Slim Helú, the world's richest man, owns controlling stakes in both companies. The second-largest deal was Indian telecom Bharati Airtel's $10.7 billion offer to purchase Zain Africa from Kuwait-based Zain Group.


Emerging markets accounted for one-third of worldwide M&A; volume for transactions announced in the first quarter, compared to 18% in the same period of 2009. Cross-border M&A; activity totaled $209 billion and accounted for 37% of overall M&A; volume in the first three months of 2010, versus 23% in the same period a year earlier.


The overall value of worldwide M&A; transactions announced in the first quarter rose 21% to $573 billion, according to Thomson Reuters. Goldman Sachs was the leading financial adviser in the first quarter, followed by J.P. Morgan, Credit Suisse, Morgan Stanley and Deutsche Bank.


Mergers involving US companies rose 60% to $275 billion, while Canadian M&A; transactions fell 29% in the first quarter. Transactions involving bankrupt US companies soared more than 800% from the same period a year earlier to $32.5 billion. Simon Property Group's announced $30 billion acquisition of General Growth Properties, a rival mall operator, accounted for most of the bankruptcy deal volume.


European M&A; in the first quarter slipped 1% to $200 billion. The decrease was mostly due to a decline in government-led deals. M&A; activity in Asia rose 197% to $139 billion in the same period. Hong Kong-based Prudential's $35.5 billion acquisition of AIG's AIA division was the largest deal ever in the Asian insurance industry.


M&A; activity in the US financial services industry will increase in 2010 as industry conditions continue to improve and the outlook for regulatory reform becomes clear, according to PricewaterhouseCoopers. In a report published in April, the firm says dealmaking in the remainder of 2010 will be marked by a steady stream of FDIC-assisted M&A; deals in the banking sector. Loss-sharing agreements provided by the FDIC will continue to attract strategic and financial investors, it says. There also will be further consolidation of small and mid-size asset management firms and an increase of mergers in the property and casualty insurance industry, it says. However, deal activity in the US insurance sector is likely to remain subdued overall, given the unknown impact of proposed regulatory reform, fewer distressed sellers and a focus on rebuilding balance sheets, the report says.

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Improving fundamentals will reduce the gap between buyer and seller pricing expectations, and M&A; activity will increase later this year, the report says. "We believe the current market presents a significant number of potential opportunities for investors that have the liquidity and capital strength to be acquisitive and the infrastructure and capabilities to realize potential synergies," says Gary Tillett, financial services leader in the transaction services group at PricewaterhouseCoopers.

IMAP, a global organization of leading M&A; advisory firms involved in middle-market deals, says its latest survey of more than 500 advisers shows indications that M&A; is on the comeback trail. IMAP advisers predict that energy and power, consumer products and services, industrials, and healthcare will see the strongest activity in 2010.


Nearly half of the advisers expect transaction pricing to rise, particularly in Asia and Latin America. About half also expect access to bank financing to improve. Industry consolidation is expected to be the main driver of deals.

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Source: Thomson Reuters