Transactions Blog

Identifying the most important value drivers and estimating values in distressed companies is key for a successful restructuring process, especially in the case of debt for equity swaps. That’s what Michael De Roover, Partner at PwC and Philippe Rasquin, Director at PwC talked about on the fourth session of our M&A Academy.

They shared with our audience their experience in valuing distressed companies and business restructuring, highlighting the key issues and discussing some of the key steps to consider when faced with a restructuring.

Download “Safeguarding value through business restructuring“.

More info about the M&A Academy season (programme, subscriptions, etc.).

On 8 January 2010, PwC has published the Q4 2009 IPO Watch Europe report. The IPO Watch Europe surveys all new primary market equity IPOs on Europe’s principal stock markets and market segments (including exchanges in Austria, Belgium, Denmark, France, Germany, Greece, Holland, Ireland, Italy, Luxembourg, Norway, Poland, Portugal, Spain, Sweden, Switzerland and the UK).

Europe’s IPO markets recorded a distinct upturn in activity in the fourth quarter of 2009, with both value and volume rising markedly over the previous nine months when stock exchanges continued to suffer from the worldwide loss of confidence in the capital markets and the recession. However, pricing proved difficult in what remains a buyers market.

There were 61 IPOs on European exchanges in the last quarter of 2009 with an offering value of €4,994m, compared with 44 listings that raised €1,375m in the previous quarter and the 64 IPOs with a value of €1,238m that were recorded in the final three months of 2008.

NYSE Euronext led on IPO value with 13 IPOs raising €1,907m (in the same quarter of 2008, it had an equal number of IPOs but they raised just €6m) followed by the Warsaw Stock Exchange (WSE) with 16 IPOs valued at €1,454m (compared to 23 lPOs a year ago, raising €555m). London was in an unaccustomed third place with 14 listings raising €951m (two more than in Q4 2008 with a value of €666m). Nine of the London IPOs were on its AIM market and raised €388m, the same number it saw in Q4 2008 with a total value then of just €3m. The remaining listings were on the Main Market and raised €563m.

Warsaw recorded the biggest IPO of the quarter, the Polish energy company, Polska Grupa Energetyczna which raised €1,407m, followed by the Dutch insurance company Delta Lloyd which listed on NYSE Euronext and raised €1,016m. The third largest, also on NYSE Euronext, was the French industrial goods company CFAO, which raised €806m, while London hosted the fourth biggest IPO, that of investment company Gartmore Group, raising €378m.

For further details, read the IPO Watch Europe Survey Q4 2009 from our UK colleagues.
IPO Watch Q4 2009 full report

Recently the President of the Brussels Criminal Court judged that the investigation of KB Lux was not performed on valid terms. This decision again raises questions about how to tackle economic crime and how to deal with fraudsters. In a day-to-day business environment we are more inclined to take measures internally, which in light of the KB Lux decision appears to be a more effective method. In addition, companies are often confronted with questions when dealing with a new cooperation, joint venture, merger or acquisition. These situations call for a fraud due diligence in order to avoid the inheritance of fraud risks. Due diligence investigations often prove crucial in identifying fraud risks and detecting incidences of fraud outside the books and records.

E.g. a purchaser who discovers post-deal that one of the sellers has defrauded or bribed vendors of the purchased company may be confronted with the fiscal, financial and legal consequences of such behaviour. A thorough pre-deal fraud due diligence might reveal such liabilities in many cases.

The PwC China M&A press release revealed that domestic and inbound M&A deal volumes in China (including Hong Kong and Macau) in the second half of 2009 are returning to robust 2008 levels, indicating that the impact of the global economic downturn on China M&A seems to have been short lived.

More than 1,800 domestic transactions (deals being intra-China or from HK to the mainland and vice versa) are likely to be recorded in the second half of 2009, for a total of about 3,200 mergers and acquisitions for the full year, compared to nearly 3,800 in 2008. Looking to 2010, domestic deal activity is expected to grow by more than 20% compared to 2009.

A continued decline however was noted for deals made by foreign strategic buyers (focussed on sorting out problems in their home markets) and also foreign financial players finding new deals harder to come by as gaps in pricing expectations between sellers and buyers continued. There are indications though that those foreign strategic buyers will re-emerge in greater volume and deal size soon, reflecting a pent-up appetite for China targets.

The China outbound growth story will continue and year-on-year outbound M&A growth of about 40 per cent is not an unlikely outcome. Whilst deals for energy and resources will continue to dominate, owners of the larger Chinese privately owned enterprises are looking for know-how and access to foreign markets, being encouraged by the Chinese government.