Transactions Blog

In a recent report, ‘M&A: Down but not Out’, by Boston Consulting Group and UBS based on interviews with chief executives of 164 publicly listed European companies, deal activity is predicted to increase.

This is in part due to the need for consolidation in some industries, the attractive price of assets and struggling companies needing new ownership.

The outlook for the mergers and acquisitions market in 2009 is therefore not all negative, although difficulties in securing bank debt looks set to continue. Locally there still appears to be a good appetite from funders for quality mid-market transactions.

Despite the higher risk and uncertainty of doing deals in the current economic climate, some interesting points come out of the survey:

• Most of the companies have not changed their M&A plans in the wake of the crisis, and only 15% believe it is too risky to do a deal at the moment
• Almost one third of companies expect to make an acquisition over the next 12 months, and more than 20 percent intend to enter into relatively large deals (target sales representing more than 10 percent of acquirer’s sales)
• 43 percent of companies believe there will be ‘transformational’ deals in the coming year with consolidation the biggest driver for these, followed by cheaper prices and the rising number of ailing businesses.
• Large acquisitions are most likely in the Energy, Utilities, and Pharmaceutical and Biotech sectors
• Most companies expect the number of restructuring deals to increase substantially, leading to a rise in the number of spin-offs, carve-outs and closures of individual businesses in the coming months.
• Most companies face a diverse set of internal and external barriers to executing deals including macroeconomic and target-specific. Most of these obstacles can be overcome for example, buyers conduct a more rigorous due diligence process and sellers will have to satisfy requests for more information and market their assets even more effectively to secure a more attractive price.

Read full article:
http://www.bcg.com/impact_expertise/publications/files/MA_Down_but_Not_Out_Dec_2008.pdf 

Your company acquired several businesses over the last year and you know that not all of your synergy targets and potential have been achieved? In that case, we strongly recommend completing the unfinished business.

The precedent 3 to 5 years were marked by an unparalleled frenetic M&A activity illustrated by many large corporations who acquired each several companies in that time period or even within a year.  Thereby, a certain level of integration has been clearly achieved for those acquisitions, but we observe that in most cases, these have not been completed, as management already looked out to the next acquisition. 

This is no longer acceptable in today’s economic circumstances. In the rush of cost savings to face the dramatic economic crisis, companies have their last chance to complete their unfinished business. Typical unfinished integration areas are:

Integration of the support functions into shared services;

• Alignment and simplification of the processes and systems for further efficiencies in non-core operating activities (assuming for core operating activities, these have already been completed!);
• Purchase grouping/consolidation of materials and services affecting not only the Cost of Goods Sold, but also the overheads;
• Group structure simplification and further group tax structure optimisation, including liquidation of non-active or dormant entities;
• Prepare non-core activities into quasi stand alone activities (with transition and service level agreements) for considerations of a potential future divesture

Feel free to contact me to discuss

Cross-border reorganisations: implementation of EUMerger Directive into Belgian tax law

On 12 January 2009, the act implementing the EU Merger Directive into Belgian tax law was published in the Belgian official gazette. Most of the new act’s provisions are applicable immediately as of its date of publication. The act introduces a tax-neutral regime for cross-border reorganisations and also brings the existing tax provisions applicable to purely Belgian reorganisations in line with the EU Merger Directive.
The purpose of this newsletter is to comment on the changes made by the new act and give you an insight into the opportunities now available to your organisation in respect of cross-border mergers.

Read the full Transactions newsalert (pdf)