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
Tags: acquisition, China, Chinese, deals, emerging markets, M&A, mergers & acquisitions, Private Equity, restructuring, Strategy, Transactions
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
Tags: acquisition, emerging markets, financial services, M&A, mergers & acquisitions, Nigeria, Private Equity, Strategy, Transactions
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
Tags: cross-border, deals, due diligence, emerging markets, M&A, mergers & acquisitions, Private Equity, Strategy, Transactions
10Dec
In a recently published decision n°2011.535 of February 28, 2012, the Belgian tax ruling service concluded that carried interests paid to managers of a Private Equity house were liable to tax as ordinary income @ 53,5%. The circumstances were specific but the reading of the ruling decision makes clear that the tax authorities’ unfavourable decision was notably due to a lack of appropriate structuring.
This ruling decision is relevant to private equity houses for two reasons. First, it indicates that appropriate structuring of carried interests is crucial if one wants to have them treated as capital gain or investment income rather than as ordinary income. Second, it first put carried interests under the “Belgian tax spotlights” and this may be the starting point of a new era in which the Belgian tax authorities may increasingly put such kind of instruments under deep scrutiny.
If you would like to discuss this further, please contact Luc Legon or Jan Muyldermans.
Jan Muyldermans - Lead Transactions Partner - Tel. + 32 2 710 74 23
Luc Legon – Tax Director – Tel. +32 2 710 43 55
Tags: Belgium, Capital gains, carried interest, dividend, Executive remuneration, Management participation, Personal Tax, Private Equity, Remuneration, Ruling, Tax, Transactions
19Nov
What makes deals in China happen? How can the process be improved?
In a new publication we are examining the growing number of smaller deals, flowing in both directions, and in a range of sectors that are the lifeblood of China and European trade ties. We believe that these deals, big and small, will be a source of growth, jobs and innovation for years to come. We look at how both parties can increase the chance of a good deal completed.
Though M&A activity is steadily growing, both Chinese and European M&A teams often face unfamiliar hurdles. There is a need for greater understanding of approval processes, strategic rationale and operational as well as cultural or political concerns for bids to be successful. Money may not be enough, even for companies keen to buy or sell.
Downlad the publication in PDF format (English)
Downlad the publication in PDF format (Chinese)
Tags: acquisition, China, Chinese, deals, emerging markets, M&A, mergers & acquisitions, Private Equity, restructuring, Strategy, Transactions
21Sep
On the 18th of September, the Dutch tax package for 2013 was presented. The following proposed changes are relevant for Transactions:
1. The Dutch thin capitalisation rule (i.e. denying interest tax deductibility in case a certain debt-to-equity ratio is not met) is proposed to be abolished per January 1st, 2013.
2. Under new Dutch civil law rules, Dutch limited liability companies may issue shares without any voting rights. Currently, in order to set up a fiscal unity for Dutch corporate income tax purposes, the head of the fiscal unity needs to be entitled to at least 95% of the (in)direct legal and economic title of the shares in the fiscal unity members. The Ministry of Finance wants to prevent fiscal consolidation in case of less than 95% voting rights. Therefore, with effect from January 1st, 2013 it will be required that the head of the fiscal unity is entitled to at least 95% of the voting rights on the shares in its subsidiaries.
3. The Tax Package also contains a proposed change to bring within the Dutch tax net situations in which a foreign resident entity performs management activities for a Dutch tax resident entity, without being a formal director or supervisory director of such a Dutch entity. This proposed change is specifically aimed at introducing a basis to tax Belgian management fees in the Netherlands. Under the Belgium-Netherlands tax treaty for the avoidance of double taxation the right to tax such management fees is allocated to the Netherlands. This is caused by the fact that this tax treaty contains a definition of ‘director’ which is broader in the regular treaties. After the proposed change becomes effective per January 1, 2013, the Netherlands are able to effectuate this taxation. The broader definition and the fact that Netherlands are allowed to levy tax on such activities performed by a Belgian Management company have been agreed already with Belgium. Under tax treaties with a stricter definition of ‘director’, this rule should not have effect.
If you believe that these proposed changes could have an impact on you, feel free to reach out to your dedicated PwC tax consultant.
Tags: Fiscal unity, M&A, Management fees, mergers & acquisitions, Netherlands, Tax, Tax consolidation, Thin Capitalisation, Transactions
12Sep
Important new rules for public take-overs have been introduced in the Netherlands.
The main changes are:
1. “Put up or shut up”- provision: the financial regulator can, upon request of the target company, oblige a potential bidder to provide more clarity regarding its intentions, by means of a public announcement (e.g. a press release);
2. Transactions during an offer: in the period an offer has been made, all transactions done on a regulated market relating to the shares to which the offer relates, need to be made public by way of a public announcement;
3. Increase offer price: during the registration term of the offer (“aanmeldingstermijn”), the bidder has the possibility to increase its offer price several times whereas before the increase was possible one time only.
The new rules have entered into effect as from 1 July 2012.
For more details on the recent changes, you can contact Pierre Queritet (Director M&A Legal Services Belgium – +32 (0) 2/710.71.13) and/or check out: http://actueel.nl.pwc.com/site/financiele_dienstverlening/algemeen/1528/nieuwe_openbare_biedingsregels_per_1_juli_2012.html?WT.mc_id=emm.nb.12.08.24
Tags: Besluit Openbare Biedingen, IPO Netherlands, M&A, Mergers & Acquistion, Public take over Netherlands, Put up Shut up, Transactions
10Sep
Following the Di Rupo measures announced on 28 December 2011, measures concerning the carrying forward of excess NID are now included in a bill which will be finally voted shortly.
According to this bill the carrying forward of excess NID will no longer be possible. Grandfathering rules are however foreseen allowing the use and carry forward of the existing “stock” of excess NID (i.e. NID carry forward available per end of tax year 2012), subject to certain limitations:
· The deduction of the stock of excess NID will be the last deduction in the tax return;
· The use of excess NID is limited to 60% of the taxable profit exceeding EUR 1 million;
· The existing stock of excess NID can still be carried forward for maximum 7 years. The portion of excess NID that cannot be used due to the 60% limitation can be carried forward indefinitely.
The above modifications will be applicable as from tax year 2013. Earlier on, the government already capped the effective NID rate at 3% (increased by 0,5% for SME’s) for tax year 2013.
Tags: Di Rupo, excess NID, M&A, Notional Interest Deduction, Transactions
05Sep
New three percent tax on dividend distributions
Dividends and other distributions (including deemed dividends for tax purposes) paid on or after 17 August 2012 (publication of the law) by French and foreign entities subject to French corporate income tax, are subject to a new 3% surtax.
The surtax applies to all types of beneficiaries (corporations, individuals, etc.) located in France or in any foreign jurisdiction (including the EU). Dividend distributions made within a French tax group or distributions made by a SME are now exempt from the 3% contribution.
The 3% tax charge is not payable where the distributions are made in the form of issuance of new shares, as well as those made in the form of cooperative investment certificates. This exemption is available on the condition that, in the subsequent 12 months, the company does not carry out a capital reduction exercise which takes the form of a repurchase of its own shares.
Tightening the conditions to carry forward tax losses
We also note that the restrictions to carry forward tax losses proposed in the Finance bill (see out blog dd. 1 August) have been incorporated in this Act. These new conditions will apply to fiscal years closed anytime after July 4, 2012.
The above changes may have a significant impact on your business in France. Do not hesitate to contact your PwC tax specialist to discuss these changes.
Tags: carry forward, corporate tax, dividend, France, M&A, tax increase, tax losses, Transactions
04Sep
But appetite for China deals abroad remains strong, with the value of outbound deals tripling
We have summarised the key findings of PwC’s 2012 China M&A Review and Outlook.
- Overall China M&A activity declined by 33% in deal numbers and 10% in deal value in the first half year of 2012 compared to the same period last year.
- The overall decline is mainly due to the drop in both strategic inbound deals (-42%) and domestic deal activity in China (-25%). Foreign strategic buyershave pulled back on M&A activities as they face uncertainties in their home markets. Domestic (intra-China) deals have dropped from record highs in 2011 as the growth rate in the Chinese economy slows.
- While private equity deals worth over US$10 million have dropped sharply (down 39%), partly because deal processes have slowed in anticipation of declining prices, private equity funds remain highly liquid and eager to enter the market.
- In contrast, the macro global challenges have not greatly affected China’s appetite for doing deals abroad. Chinese outbound deal values managed to maintain their levels close to 2011 (down only 6 per cent) but the real highlight is that the value of these deals has tripled compared to the rather low first half of 2011 and are on track to exceed 2011 full year numbers. Chinese companies are taking advantage of buying opportunities to acquire resources and technology-focused businesses in overseas markets.
- Looking forward, we anticipate another record full year for China Outbound M&A, and a strong recovery in other China-related M&A the timing of which, however, will depend upon the resolution of macro-factors affecting the strength of major world economies in Europe, US and China.
Download the presentation here: 2012 China M&A Review and Outlook
Tags: China, M&A, Private Equity, Transactions
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