Market studies chave shown that over the last years the total accounting value of all lands and buildings of the 30.000 biggest BelCo’s amounts to EUR 50 billion. When you know that the market value of said assets equals minimum 3 times their accounting value, this represents a dramatic hidden value in the current market environment. Indeed, when companies face difficulties to access the capital market, releasing such potential should be high on their agenda. In a broad sense, this can involve OpCo-PropCo structures either internally or externally financed, straight disposals, or joint-ventures with professional real estate investors.
During the sixth session of our M&A Academy on Thursday, 25 March, we shared with you how to free up cash from real estate, by tackling the corporate tax, VAT and registration duties matters to be taken into account while splitting up real estate from operational structures. We led you through the current environment, pitfalls and opportunities of this developing market.
2008 and 2009 are challenging times for the M&A market due to the lack of available funding. Many investors and international groups are looking for cost-cutting opportunities and cash optimisation.
During the 5th session of our M&A Academy, we tried to evaluate how reshaping your conventional business model towards a more flexible structure can help you in for example the improvement of your business model or the optimisation of your tax credits and/or cash position.
Since business restructurings trigger multiple tax issues, not only transfer pricing aspects, this module also focused on the following aspects:
the arm’s length risk allocation to restructured group entities;
the potential ‘exit charges’ and indemnifications upon restructuring;
the recognition, by tax authorities, of restructuring transactions.
2008-2009 were challenging times for the M&A market due to the lack of available funding. Many investors and international groups are looking for cost-cutting opportunities and cash optimization.
Reshaping your conventional business model towards a more flexible structure can help you in for example the improvement of your business model, tax credits optimisation and/or cash optimisation.
Furthermore, the new merger law makes it possible in Europe for certain international groups to offset future tax losses and other tax attributes on a European consolidated level, leading to a lower effective tax rate, realising tax cash savings.
The economic downturn continues to negatively impact deal activity and deal value in the first half of 2009. Global deal volume in the transportation and logistics (T&L) sector was down 45% in the second quarter of 2009, compared to the prior quarter, and overall deal value dropped 55% over the same time period.
Far behind the pace of 2007 and 2008, companies focused more on weathering the economic crisis instead of committing their available capital to new transactions. Credit restraints and a weaker operating environment have shifted attention in the sector toward smaller deals, minority stakes, divestitures and distressed targets. The three largest announcements during the first half of the year could be classified as “midmarket” and all related to minority purchases or purchases of remaining interest.
Our US colleagues published today a study on the M&A activity in the industrial products sectors. See www.pwc.com/us/industrialproducts
Despite the year-over-year decrease, some sectors began showing an increase in volume or value in the second quarter of 2009, when compared to the prior quarter. The chemicals sector experienced an increase in deal volume while the metals sector showed an increase in deal value during the second quarter of 2009. The aerospace and defense (A&D) and engineering and construction sectors were the bright spots in the second quarter, experiencing increases in both deal volume and value from the prior quarter.
”The outlook on deal activity and deal value for the rest of 2009 is following along the same path we saw in the first half of the year,” said Dean Simone, U.S. industrial products leader at PricewaterhouseCoopers. “Lack of financial investors, tight capital markets and the practically nonexistent large deal activity suggests we haven’t turned the corner just yet in the industrial products sector.”
Their conclusions are no different from what we observe from our side …
During the last six years (2003-2008), Emerging Market entities made some 844 acquisitions or investments in Western Europe with a combined value of nearly € 120 billion (of which some 3% in Belgium).
As a result of the ‘credit crunch’ and the global economic slowdown, 2008 has been a week year for global M&A activity. Despite this, 2008 was a record year for M&A transactions conducted by Emerging Market acquirers or minority investors, with 256 completed deals with an overall value in excess of € 45 billion.
Mergers, acquisitions, disposals – even in good times it can be hard to realise the full value of a transaction. A tough economic climate typically triggers a host of problems, including underperformance, declining earnings, liquidity shortfalls and cash flow blockages. When companies exhibit symptoms of distress, early detection and swift, decisive action are the keys to restoring performance.
A series of new publications have been issued by PricewaterhouseCoopers on the Merger & Acquisition activity of 2008 in the Energy, Utilities and Mining industry.
Renewable Deals
One publication comments on the global renewable power market, its evolution and major deals over 2008. The renewable energy sector is one of increasing importance as a sector, but also for deal making. Energy diversification, technological breakthroughs and climate change regulation will all play a part in driving the growth of the industry.
The report examines the rationale behind the overall trends and the key individual deals, as well as some of the critical issues for companies engaging in deal activity within the sector. The publication also looks ahead at 2009 and sees increasing interest of large industrial companies from outside the sector. Clarification of the true extent of political commitment to clean energy will be a major factor for the market’s evolution, along with technological developments to bring the costs down.
Lead advisors are often placed in the role of ‘bad cop’ when pushing the deal through for the seller and getting the highest price possible for the business. But what is the best way to work with a lead advisor and in what ways can they add the most value in a transaction process?
Planning before the sales process even starts is essential to allow the setting of strategic and financial objectives as well as getting an idea as to the internal resources available for the transaction process. One of the key messages from Kris Geysels, CFO of Aviapartner, in his presentation at the M&A Academy was that lead advisors will not take any of the preparation work away from the internal team.
A new Tax Act Implementing the EU Tax Merger Directive into Belgian law was published in the Belgian Official Gazette on the 12th January and came into force immediately.
The act introduces a tax-free regime for cross-border reorganisations. In addition, it also brings the existing tax provisions applicable to internal reorganizations in line with the EU Merger Directive.Most provisions are applicable as of the date of publication.
The EU Merger Directive of July 23, 1990 (as amended by the EU Directive of February 17, 2005) provides for a tax-neutral regime for cross-border reorganizations such as mergers, demergers, partial demergers, share-for-share transactions, contributions of assets and transfers of registered offices. Tax neutrality is provided both at the level of the companies involved in the reorganisation as well as in the hand of their shareholders.
Credit restraints and a weaker operating environment have shifted attention in the sector toward smaller deals, minority stakes, divestitures and distressed targets. The three largest announcements during the first half of the year could be classified as “midmarket” and all related to minority purchases or purchases of remaining interest.
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