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May 2013
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  • 23Apr

    PwC research found that recent years’ decline in banking M&A is not simply due to a cyclical downturn but represents a radically changed economic and regulatory environment.  The sovereign debt crisis in Europe will continue to affect banking M&A for as long as it continues and restructuring is expected to remain the most important driver of banking M&A in Western Europe over the next few years.

    Restructuring drivers in this West European and Belgian market are multiple:

    • stricter capital requirements, combined with new liquidity rules will increase the cost of credit;
    • future capital requirements will not be generated by revenues alone, but will require a search of cost efficiencies and synergies;
    • toughening of capital requirements for the trading books should incentivise less proprietary trading;
    • as of today, significant differences exist across banks and countries in calculations of RWA and capital requirements.  It can be expected more harmonisation of internal models will be imposed.

    In addition, the Belgian government took a number of positions during the crisis that can be expected to unwind in the future.

    Download the full research new frontiers in M&A banking.

    If you want to know more, please contact our team.

    Philippe Estas Tel. +32 (0)2 7104041
    Roland Jeanquart +32 (0)2 7104024
    Gregory Joos Tel. +32 (0)2 7109605
    Philip Ide Tel. +32 (0)2 7109509

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  • 17Apr

    Brazil is likely to become the world’s fifth largest economy by 2020 and an ever more important business destination for many Belgian companies. This promising emerging market offers excellent opportunities but despite the increasing interest and confidence in Brazil, prospective investors still find it difficult to overcome complex regulatory and legal challenges as well as out-dated perceptions of the country’s strengths and weaknesses.

    To help our clients improve their understanding of these perceived barriers and the ways to clear the path to a successful investment or transaction, PwC’s Transactions team welcomed a team of specialists from PwC in Brazil to host a seminar on 15 April in Brussels.

    At the event, we were honoured to welcome Mr Andre Amado, Brazilian Ambassador to Belgium and Luxembourg, and Mr Arnaud Thienpont, Head of Tax at AGC Glass, as our keynote speakers.

    Brazil’s economic environment (and paradoxes!); its financial and tax regulations and M&A market, as well as information on financing and investment programs were all discussed.

    Top three considerations for doing business in Brazil

    The top three considerations that foreign investors need to bear in mind when contemplating doing business in Brazil can be summarised as follows:

    • Complex and costly tax and labour regulatory environment: most of the ‘deal breakers’ derive from tax and labour exposures pointed out during the due diligence work
    • Excessive bureaucracy and formalities for certain businesses and industries
    • Investment strategy and location: whether to go for a greenfield (‘start from scratch’) or brownfield (‘M&A’) investment, taking into account the infrastructure and related operating costs

    If you want to know more about this seminar or need help with doing business in Brazil, please contact our team.

    Jan Muyldermans Tel. +32 (0)2 7107423
    Lieven Adams Tel. +32 (0)2 7104075
    Daniel Aranha Tel. +32 (0)2 7104512

    The Brazilian Ambassador Mr Andre Amado and Lead Transactions Partner Jan Muyldermans explain why Brazil is an attractive market for foreign investments.

     

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  • 09Apr

    Six months can be a long time in M&A.  Our first edition of ‘China Deals’ last autumn focused on how the volume gap in deal flow between Europe and China and vice versa was closing fast and how we expected this trend to accelerate.  Six months later, that gap has not just closed – the tide has turned for Chinese deal flow…

    Though China’s M&A activity volumes in 2012 were down on those of 2011, China’s outbound deal value actually rose by an impressive 54%.  Moreover, European companies were among the biggest beneficiaries of that rise, with Chinese investments in the region up by 25%, representing 29% of all of China’s outbound deals.

    This sets a new benchmark for Chinese investments into Europe and one that we believe heralds a shift in direction for M&A flows over the coming years.

    Another element is the shift happening in China’s private equity sector that has started to mature and to shift focus to returns through overseas M&A.
    Though very early days, we can see this shift having a big influence on deal-making between Chinese and European companies in the years ahead.  It may make the M&A arena even more competitive but it should also bring more investment opportunities to those watching out for them.

    Download the publication: China Deals – A wind of change for China-Europe M&A

    For further questions please contact:

    Jan Muyldermans - Lead Transactions Partner, Tel. +32 2 710 74 23

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  • 21Mar

    In this report, we look at the prospects for deal activity in 2013 and the pockets of opportunity that are attracting investor interest from around the world.

    Restructuring within Europe offers a range of further opportunities. The focus in this edition includes, the search for a broader customer base among French mutual insurers and the openings created by the changing financial services landscape within Belgium and the Netherlands. We also look at how loan portfolio transactions are becoming an increasingly important strategic tool, both for buyers and sellers.

    The value of European FS M&A rose by 35% to reach €51 billion in 2012. But strip away the government-led transactions and the picture is more mixed, with the value of private sector-led deals actually showing a small decrease.

    Deal activity will continue to be spurred by the need to streamline structures and finances, the search for greater financial stability, the role of scale in response to margin pressures and the desire to take advantage of faster growing markets.

    Key findings of the report:

    • Nigeria has significant scope for financial services M&A over the next few years. 2012 saw several large private sector transactions.
    • The oil and gas rich states of the Gulf Co-operation Council is one of the most interesting, yet least well known, asset and wealth management markets.
    • Overseas operations are being sold as groups seek to raise funds and refocus on their domestic markets.
    • European banks have been among the world’s most active sellers of loan portfolios

    Read the full report here.

    For further questions please contact:

    Jan Muyldermans

    Lead Transactions Partner

    Tel. +32 2 710 74 23

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  • 13Mar

    Ready to reset your compass?

    The geography of deal-making is changing fast. Over the last five years we have seen more deal value flow from the largest high growth markets (HGM) to mature market economies than in the other direction. Between 2008 and 2012 HGM companies invested US$161 billion into mature market companies, outstripping the opposite flow of US$151 billion. In 2012 alone, HGM companies closed deals for mature market targets worth US$32.6 billion, almost three times the amount they invested in 2005. We see this shift in dealflow direction as the start of something bigger, that will not just bring a much needed boost to the global M&A market but that can stimulate growth for both mature and HGM market companies alike. In this report, we look at how dealflows are changing and we also consider how new types of HGM investors are turning to M&A and the factors driving their investment choices. Large and mid-sized private companies have now joined the state-backed investors who were among the first to acquire mature market targets. HGM investors’ scope is also widening, with HGM to mature market M&A activity ranging from energy, raw materials and engineering to media, retail and consumer goods companies.

    Getting to grips with new deal dynamics

    Here are just some of PwC’s suggested measures for buyers and sellers in deals between high growth and mature market companies:

    Addressing valuation mismatches

    • Greater transparency by both buyers and sellers around deal drivers can increase trust/manage expectations.
    • Sellers should not assume that an HGM company may have easier access to capital.
    • Sellers need to understand the buyer’s investment timeframe and shareholder environment before setting premium.
    • Clarify valuation techniques to ensure both parties are working with the same parameters.

    Agreeing a timeframe for completion

    • Both parties need to understand what constitutes a ‘normal’ timespan for negotiations and completion.
    • Buyers should educate sellers early if special approval processes need to be followed.
    • Foster relationships with key decision-makers at an early stage, so that dialogue is possible if the deal timetable begins to slip.

    Connecting with decision-makers

    • Take time early on to understand decision-making hierarchies – and who has the final say. This is particularly true for deals involving state-owned enterprises.
    • Buyers bidding for targets with private equity (PE) involvement should have direct contact with the PE side as well as the target company’s management.
    • Bear in mind that the time needed to develop relationships varies greatly from culture to culture.

    Reconciling deal process differences

    • Plotting the deal process and due diligence approaches of buyer and seller will highlight where they diverge.
    • Communicating the reasoning behind due diligence practices can make the other party more comfortable/willing to cooperate with the process.
    • Be aware that high growth markets can have very different reporting, tax and legal demands and systems that can slow the due diligence process and necessitate more requests for information.

    Please click here to download the full report in PDF format.

    For further questions please contact:

    Jan Muyldermans

    Lead Transactions Partner

    Tel. +32 2 710 74 23

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  • 05Mar

    On 30 October 2012, the Court of Appeal of Gent ruled that a change of control is not justified by legitimate financial and economic needs if the target company is in a financially sound position. This judgement implies a narrow interpretation of the concept of legitimate financial or economic needs in the framework of article 207, al.3 BITC 92 and thus limits the possibility of keeping the carried forward tax losses in case of a change of control.

    Background: Financial or economic needs

    In case of a direct or indirect change of control, the deduction of tax attributes carried-forward (such as tax losses carried forward, notional interest deduction carried forward) is disallowed, unless this change of control can be justified by legitimate financial or economic needs (cfr. article 207, al. 3 BITC92).

    The content of the condition of financial or economic needs is not defined by the law. However, in a report to the King it was stated that the condition of having legitimate financial or economic needs is met (i) in case the change of control occurs within a group of companies that are part of an accounting consolidation, or (ii) when the target company, who has financial difficulties, is able to continue, even partially, its economic activities and its employment level. These situations were however in practice considered as examples and not as being a limitative list. Furthermore, in legal doctrine it was defended that the condition of needing to have legitimate financial or economic needs was fulfilled if the transaction did not have tax avoidance as its main purpose.

    Judgment of the Court of Appeal of Gent

    In a recent court case the situation of a take over by a third party was discussed (so that the above exception of a transfer within a group of companies could not be invoked).

    In this case the Court of Appeal of Gent followed the reasoning of the tax authorities and the Court of First Instance that there were no legitimate financial or economic needs that supported the transaction simply because of the fact that the target company was not in financial difficulties (given a.o. its solvability and liquidation ratio).

    As this judgement clearly narrows the scope of the definition of legitimate financial or economic needs as stated in art. 207, al.3 BITC 92, we would like to stress that this judgement should be borne in mind when dealing with acquisitions of loss making companies.

    Jan Muyldermans
    Lead Transactions Partner
    +32 2 710 74 23
    jan.muyldermans@pwc.be

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  • 04Feb

    16th Annual Global CEO survey out now 28% of Belgian CEOs see mergers and acquisitions, joint ventures and strategic alliances as the main opportunity for growth

    Our 16th Annual Global CEO Survey, “Dealing with disruption. Adapting to survive and thrive”, seeks to understand how businesses are preparing for growth in their priority markets.

    The survey explores CEO confidence in their companies’ growth prospects, and how they’re building local capabilities and creating new stakeholder networks in new markets. M&A is very much at the top of the agenda for those pursuing new growth opportunities in 2013.  22% of Belgian CEOs who were surveyed plan to start a domestic M&A deal in 2013, compared to 50% aiming to launch an international M&A operation. Growing in foreign markets via joint ventures or strategic alliances is most popular because these structures provide a means for exploring possibilities and assessing the potential to escalate cooperation into a full M&A later.

    The 16th Annual Global CEO Survey is based on a total of 1,330 interviews with CEOs in 68 countries. 312 interviews were done in western Europe (32 in Belgium, 38 in France and 36 in Germany).

    Find out what’s underpinning CEOs’ outlook and download the key findings for Belgium here.

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  • 23Jan

    But it’s not all smooth sailing as challenges abound so shows a recent report from PwC.

    With turmoil in the global economy and with China’s economy experiencing a marked slowdown in 2012, a perfect storm has emerged for domestic and foreign private equity players. There are opportunities for private investors in China to increasingly and on a larger-scale transform corporations and entire industries into pillars of future economic growth. The private equity industry has become an important source of growth capital, bolstered by continued policy support from the Central Government. This will position the private equity industry in China to likely achieve a record year in 2013, in terms of both deal volume and value. However challenges abound in the face of opportunity.

    We believe new deal and exit activity will accelerate strongly as from Q2 2013 as pricing expectations adjust, 2012 results become available, IPO markets re-open and China’s leadership’s transition takes effect. 2013 will be a record year for private equity in China and there are very strong tailwinds for the private equity industry in China over the medium term.

    Download the full report ‘Private equity in China: Reflections on 2012 and outlook’ in pdf format here.

    For more information about investing in China, visit our China desk webpage or contact Jan Muyldermans.

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  • 17Jan

    Below please find a summary of the most important changes of the Belgian additional tax measures for the 2013 budget. For an overview of the main measures please visit our previous blog post on this topic.

    Capital gains on shares: Capital gains on the sale of shares, realised by large companies (i.e. not by SMEs), are subject as of FY13 (tax year 14) to a separate 0.412% tax (i.e. 0,4% increased by a 3% crisis contribution). The tax is not deductible for corporate tax purposes and it cannot be offset with (carried over) tax losses.

    Withholding taxes: A uniform 25% withholding tax rate applies to movable income, including dividends, interests and royalties, however specific exceptions apply (e.g. liquidation surplus at 10%, etc.). The various existing withholding tax exceptions are not affected.

    The NID rate for tax year 2014 (accounting years ending between 31 December 2013 and 30 December 2014, both dates inclusive) is expected to decrease to 2.742% (3.242% for SMEs). This is however not yet included in the act. For the sake of completeness, note that the new rules with respect to the limitations to carry forward excess NID (as summarized in our post of 10 September 2012) have been published in the official gazette of 20 December 2012.

    How do these new tax measures affect my Belgian business?

    Check the latest news on our taxreform newspage. If you have any questions on these new measures or would like to discuss how this may affect your Belgian tax situation, please contact Jan Muyldermans or Bérengère Ferrant.

    Jan Muyldermans – Lead Transactions Partner, Tel. + 32 2 710 74 23                                         

    Bérengère Ferrant – Corporate Tax Manager, + 32 2 710 43 57

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  • 10Jan

    For most businesses, a looming peak of debt maturity in 2013 to 2016 is about to make debt refinancing a lot more challenging. In Belgium, over 60% of debts will need to be refinanced by the end of 2014. According to a PwC study, this means, in the coming year, companies will have to renegotiate an estimated 70 billion additional credits.

    PwC is doing its part to lead the way in helping businesses tackle their refinancing challenges. On 17 December, we teamed up with Linklaters to organise a half-day seminar on debt refinancing, where business leaders shared their views and experiences with Europe’s impending ‘wall of debt’.

    At the event, we were honoured to welcome Luc Van Nevel (ex-CEO of Samsonite and board member of Elia, PinguinLutosa and La Lorraine) and Ludwig Criel (member of the Executive Committee of CMB and board member of Euronav, Exmar and De Persgroep) as our keynote speakers.

     

    PwC’s top 5 tips for debt refinancing

     

    1. Be prepared and start early
      Preparing thoroughly will keep you in the driver’s seat, so you can maintain control of your debt financing
    2. Perform a funding option analysis
      Actively investigate the pro’s and con’s of various sources of debt available to your company, e.g. compared to traditional bank debt from your principal bank(s)
    3. Know your business risks
      Ensure that long-term cash flow projections are available to show a realistic picture with multiple scenarios, including cases of when things go wrong. Make sure you report risks properly and decide in advance the possible actions in case of default
    4. Know your banks
      A distribution of the business across the (relationship) banks is key. Make sure the product capabilities and strengths of each bank are clear and that the banking group suits the needs of your business in the long-term
    5. Know your situation
      Don’t think that the new rules of the debt financing game do not apply to your company, even if you have performed well throughout the crises

     

    If you need help refinancing your business, or want to hear more about our seminar, please contact our Business Restructuring team:

    Michael De Roover
    Philippe Fimmers

    Koen Vermoere

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