WILLIAM FRY MID YEAR M&A REVIEW 2013

Transcription

1 WILLIAM FRY MID YEAR M&A REVIEW 2013

2 Overview Bryan Bourke Head of Corporate and M&A This review, published in association with Mergermarket, focuses on M&A activity in the first half of We also look at the likely trends for the remainder of 2013 based on recent developments. M&A activity in fell considerably short of expected levels in the first half of 2013: volume dropped by 43% year-on-year (YoY) to 27 deals, while value declined by 42% YoY to.2bn. In terms of value, the steep declines reflected a weak first quarter. Deal volume saw similar YoY decreases across both and, but value exhibited a different trend: the decrease in value was 64% YoY in, and was a more encouraging 16% YoY in. In terms of deal drivers, the first half of 2013 reflected a number of the trends we identified in our full-year M&A Review for 20. The financial services sector remains a fertile source of M&A. As in recent years, some of this activity was linked to government bailouts of s banks. For instance, the Irish Government sold insurance company Irish Life, which was nationalised during the downturn, to Canada-based Deal Volume and Value, YTD Great-West Lifeco, which already operates as a significant player in through Canada Life. The combination of these businesses will enhance Great-West Lifeco s market share in, and is expected to create a number of cost-saving synergies. The deal is the first instance of a body that the Irish Government nationalised or took over during the financial crisis being returned to full private ownership, and is a positive story for s recovery. The reduction in the level of decline in deal value in is down to a handful of large-cap transactions, with one especially noteworthy deal: generic drugs manufacturer Actavis agreement to acquire Warner Chilcott, which has an Irish holding company, for 6.5bn. The deal was one of the biggest announced in Europe in the first half of the year, and will transform Actavis into one of the world s biggest pharmaceuticals companies. When the deal completes, Actavis will re-register in, and will open up to new product offerings in areas that Warner Chilcott specialises in, such as gastroenterology and dermatology. Number of deals Volume Value m ,000,000,000 8,000 6,000 4,000 2,000 0 Value of deals m

3 Overview Also in line with our earlier expectations, significant M&A activity came from multi-national firms reassessing their portfolios and deleveraging non-core assets. This trend has been particularly obvious in financial services, but the first half of 2013 saw this type of activity taking place in other sectors. For instance, in June, telecommunications giant Telefónica agreed to sell its Irish subsidiary, which operates mobile phone network O2 here, to Three, which is owned by Hong Kongbased Hutchison Whampoa, for 850m. The deal will help Telefónica reduce its debt, and comes as a part of a broader programme of sell-offs started in 20. While some multi-nationals have disposed of their Irish businesses, others have sought out Irish targets. Out of the ten deals in the first two quarters of 2013, eight had overseas bidders. remains a popular destination because of attractive valuations and the abundance of healthy companies in a country where the macro-economic picture is regarded as improving. Interest has still largely come from developed markets, particularly North America and Western Europe. A number of deals have been driven by firms looking to access s consumer base. For instance, Norwegian security systems business Sector Alarm purchased Phonewatch, telecommunications provider eircom s home security branch, after a competitive bidding process. The deal gives Sector Alarm a strong footprint in the Irish market. H also saw some new developments. For one, we saw the pharmaceuticals, medical and biotech sector take centre stage. has been an attractive destination for pharmaceuticals businesses, with a number of global leaders based in the country. The sector is in a period of consolidation, as a large share of patents expired over the past few years and research and development (R&D) pipelines have dried up. In addition to Actavis deal to acquire Warner Chilcott, the sector saw other notable activity, including US-based Biogen s purchase of multiple sclerosis (MS) drug Tsyabri from pharmaceuticals giant Elan. The deal expands Biogen s range of MS products as, shortly before the acquisition, European regulators approved another of Biogen s MS drugs, Tecfidera. The very recently announced deal between Elan and Perrigo Company, following a competitive process for Elan, reflects this consolidation pattern. Top Irish M&A Deals, H Announced Date Deal Status Target Company 20/05/2013 P Warner Chilcott 06/02/2013 P Elan Corporation (Tysabri business) 19/02/2013 P Irish Life Group 24/06/2013 P Telefónica 18/04/2013 C Elan Corporation (13.72% Stake) 22/01/2013 P OpenHydro Group (48.7% Stake) /05/2013 C Phonewatch Target Sector Medical: Pharmaceuticals Medical: Pharmaceuticals Financial Services Telecommunications: Carriers Biotechnology Energy Industrial products and services 24/01/2013 P Betdaq Leisure 06/03/2013 C ATA Group Industrial products and services 21/05/2013 C Ashford Castle Hotel P= Pending C= Completed Leisure Target Country Bidder Company Bidder Country Seller Company Seller Country Deal Value ( m) Actavis, Inc. USA 6,546 Biogen Idec Inc. Great-West Lifeco Inc. Hutchison 3G Elan Corporation DCNS Group Sector Alarm Holding AS Ladbrokes MML Capital s ; FL Capital s Red Carnation Hotels (UK) USA Elan Corporation Canada Government of 2,404 1,299 Telefónica, S.A. Spain 850 Janssen Pharmaceuticals, Inc. USA 705 France 130 Norway United Kingdom United Kingdom United Kingdom eircom Group

4 outlook The outlook for Irish M&A for the rest of 2013 is one of cautious optimism. There are a number of reasons to expect that acquirers will continue to view positively. Irish businesses have proven attractive to multi-nationals during this period of economic turmoil, when acquirers are able to take advantage of distressed opportunities in the Irish market. The potential for recovery in /the global appeal of certain Irish assets supports ongoing positive sentiment by acquirers towards. The recent announcement by Green REIT plc that it raised over 300m, while demonstrating a continuing focus on the Irish real estate market, reflects strong and positive international sentiment towards. The level of international interest in the State s asset disposal programme, and the announcement of the Elan/Perrigo deal, reflect the same sentiment. The broader climate is also improving, which may indicate increased M&A in the near future. The International Monetary Fund anticipates that s economy will edge up by 1.1% in 2013, which would mark this year as the third successive year of incremental growth. While these growth levels are low, they are nonetheless impressive as the eurozone shrinks. Taking a closer look, s unemployment rate, while still high at around 14%, has stabilised. Services exports were strong in 20, and mitigated the drop in merchandise exports, caused by the wave of patent expirations in the pharmaceuticals sector. still faces significant obstacles: especially on the debt side, both private and public. Lending to households and SMEs has improved, but not recovered. Further, many EU member states remain economically troubled, with the eurozone and the UK expected to contract slightly in the coming year. Worries over mismatched valuations, as equity markets rally but the real economy remains sluggish, have persisted, and have likely contributed to the depressed dealmaking climate across Europe. With a large share of Irish inbound buyers coming from European countries, this may prove problematic. Though it still faces its challenges, Europe is becoming less turbulent, and there have been few knocks to buyers confidence over the past quarter. While may still have a way to go to clear its own hurdles, we expect that deal activity, especially driven by international buyers, will continue at a steady, and probably slightly improved, rate over the coming months.

5 About the research The underlying data in this report comes from the Mergermarket database. Historical data contained in this report includes deals announced from 01/01/20 to 30/06/2013, excluding lapsed or withdrawn bids or deals valued below 5m. Remark, the research and publications division of The Mergermarket Group, publishes over 50 thought leadership reports and holds over 70 events across the globe each year which allow clients to demonstrate their expertise and underline their credentials in a given market, sector or product. The Mergermarket Group, a division of the Financial Times Group, a Pearson company, offers a range of services that give clients the opportunity to enhance their brand profile, and to develop new business opportunities. To find out more please visit :

6 About William Fry William Fry is one of s largest law firms and has been a top tier firm in the corporate and M&A markets for many decades. With offices in Dublin, London, New York and Silicon Valley, we offer unrivalled corporate and commercial expertise and experience across the full breadth of the business sector. Our results-focused and innovative team of more than 380 staff have worked on the highest profile corporate and commercial transactions and legal challenges of recent years. M&A is core to our practice at William Fry. Our team has top tier credentials, a wealth of experience and an impressive depth of expertise. We are consistently involved in the most sophisticated and complex corporate transactions in, including large cross-border deals. We focus on identifying and delivering on our clients priorities. Recent awards include: Equity Capital Markets Deal of the Year 2013 (Finance Dublin Magazine s Deal of the Year 2013) IFSC Deal of the Year (Finance Dublin Magazine s Deal of the Year 2013) Corporate Law Firm of the Year in 2013 (Global Law Experts) European Private Equity Tax Team of the Year 2013 (International Tax Review s annual European Tax Awards) Recent directory commentary includes: William Fry is top class, provides the highest quality of service, and is a compelling choice for more complex cases [Legal 500, EMEA 2013] If you are looking exceptional work from smart, responsive people William Fry is the place to go. We get a Rolls Royce service. [Chambers Europe, 2013] One hell of a practice. It got to grips with the practicalities and was a great sounding board for bouncing ideas off. I always feel as if I am the centre of attention and that I am a valued client. [Chambers Europe, 2013] William Fry has high industry knowledge and interaction and is the firm of choice for many transactions. [Legal 500, EMEA 2013] contacts Bryan Bourke Head of Corporate and M&A T E. bryan.bourke@williamfry.ie Myra Garrett Managing T E. myra.garrett@williamfry.ie Owen O Connell T E. owen.oconnell@williamfry.ie Alvin Price T E. alvin.price@williamfry.ie Brendan Cahill T E. brendan.cahill@williamfry.ie Ken Casey T E. ken.casey@williamfry.ie David Carthy T E. david.carthy@williamfry.ie Stephen Keogh, London office T E. stephen.keogh@williamfry.com Shane O Donnell T E. shane.odonnell@williamfry.ie David Cullen T E. david.cullen@williamfry.ie Barry Conway T E. barry.conway@williamfry.ie Barbara Kenny T E. barbara.kenny@williamfry.ie David Fitzgibbon T E. david.fitzgibbon@williamfry.ie Ivor Banim T E. ivor.banim@williamfry.ie Andrew McIntyre T E. andrew.mcintyre@williamfry.ie Adam Synnott T E. adam.synnott@williamfry.ie Leo Moore T E. leo.moore@williamfry.ie Joanne Conlon T E. joanne.conlon@williamfry.ie

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