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Transcript of Ma Predictor Feb 2012
8/3/2019 Ma Predictor Feb 2012
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M&AFEBRUARY 2012
Confdence dips in global marketDespite still being up on the dark days o 2009, the
frst six months o 2012 look set to be challenging.
As indicated by the alling worldwide deal market,there has been a all in confdence or global M&A, with
orward P/E ratios down by 5 percent since June 2011
and down 14 percent over a year. It is a slower rate o
decline than in the previous six months, but nevertheless
it indicates that the gradual improvement in M&A over the
past two years is coming to a halt.
PREDICTOR
KPMG’s M&A Predictor is a forward-looking tool that
helps clients to forecast worldwide trends in mergers
and acquisitions. The Predictor was established in
2007. It looks at the appetite and capacity for M&A
deals by tracking and projecting important indicators
12 months forward. The rise or fall of forward P/E
(price/earnings) ratios offers a good guide to the
overall market condence, while net debt to
EBITDA (earnings before tax, depreciation and
amortization) ratios help gauge the capacity of
companies to fund future acquisitions.
The Predictor covers the world by sector and
region. It is produced twice a year, using data
comprising 1,000 of the largest companies
in the world by market capitalization.*
David SimpsonGlobal Head of
Mergers & Acquisitions
What is
KPMG’sM&APredictor?
*The fnancial services and property sectors are excluded rom our analysis, as net debt/EBITDA ratios are not considered relevant in these industries. All the raw data within thePredictor is sourced rom Capital IQ. Where possible, earnings and EBITDA data is on a pre-exceptionals basis with the exception o Japan, or which GAAP has been used.
Market
Confidence
Since December
2010
14%
18%
Net Debt/
EBITDA
Source: Capital IQ/KPMG analysis
By December
2012
© 2012 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member frms o the KPMG network o independent frms are afliated with KPMG International. KPMG International provides no client services. All rights reserved.
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Some sectors aring better than others
Across all sectors, year ahead net protexpectations have dropped since our last survey.
This is the rst time in two years that this hashappened, with the pinch being felt especially
in Basic Materials, Industrials, Utilities andConsumer Discretionary.
Against this backdrop, condence in many industriesis predictably muted, with forward P/E ratios
particularly down in Basic Materials (14 percent down)and Industrials (9 percent down).
Some sectors are bearing up better than others,
however. Consumer Staple actually registers a 2 percentforward P/E ratio increase, while Technology remains
at. Viewed in the longer term, Healthcare is also faringrelatively well. Despite registering a 3 percent P/E decrease
between June and December 2011, this is on the back oftwo successive six-month increases, leaving the sector in an
overall healthier situation than it was 12 months ago.
16
15
14
13
12
11
10
9
8Dec-10 Jun-11 Dec-11
Market confidence by industry sector
Basic materials Consumer discretionary Energy
Healthcare Industrials Consumer staple
Technology Telecommunications Services Utilities
F o r w a r d P / E r a t i o s
Confdence lags capacity
Appetite in the M&A market continues todrop, although the capacity to transactcontinues to rise, with overall net debt
forecast to drop 12 percent globallyand net debt to EBITDA ratiosexpected to be down 18 percent.This increased capacity to transactis not matched by the motivationto undertake deals in the currentclimate – a reluctance that lookslikely to set the tone for the nextsix months.
While condence
drops, capacity is
still rising.
Source: Capital IQ/KPMG Analysis
© 2012 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member frms o the KPMG network o independent frms are afliated with KPMG International. KPMG International provides no client services. All rights reserved.
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Lack o confdencerestricts deals
The total number of dealscompleted worldwide withinthe last 12 months has fallen,with particular declines inthe EMA and AsPac regions.However, global deal values aremodestly up, suggesting that
the big players are driving mostM&A activity while smallerrivals struggle.
There are big variationsbetween some of the world’smajor economies with India and
Germany showing condencedrops of 19 and 18 percentrespectively over the last sixmonths compared with the
UK with only a 2 percent dropand the US which remains at.Globally, forward P/E ratios aredown across most countries.One notable exception is Japan,which registered a 10 percent
increase over the pastsix months. This is probablydue to unusually low mid-year gures as a result ofthe tsunami, rather than a
miraculous recovery, and itis probably more accurate tocompare year-on-year data.
With a general downwardtrend in net debt/EBITDA ratiosglobally, companies have morecapacity to undertake M&A butare not showing the condenceto do so. Instead, they areprioritizing debt reduction and
balance sheet managementover M&A growth opportunities.
Overall the rst six months of2012, and probably beyond,will show an interruption to
Worldwide completed deals: 1 year trailing January – December 11
V a l u e ( U S $ m )
N u m b e r o f d e a l s
Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul -11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11
No. of Deals Value (US$m)
28,000
28,500
29,000
29,500
30,000
30,500
31,000
31,500
32,000
32,500
33,000
1,800,000
1,900,000
2,000,000
2,100,000
2,200,000
2,300,000
2,400,000
2,500,000
Americas completed deals: 1 year trailing January – December 11
V a l u e ( U S $ m )
N u m b e r o f d e a l s
Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11
No. of Deals Value (US$m)
10,900
11,000
11,100
11,200
11,300
11,400
11,500
11,600
11,700
11,800
11,900
1,050,000
1,100,000
1,150,000
1,200,000
1,250,000
1,300,000
1,350,000
AsPac completed deals: 1 year trailing January – December 11
V a l u e ( U S $ m )
N u m b e r o f d e a l s
Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul -11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11
No. of Deals Value (US$m)
7,000
7,500
8,000
8,500
9,000
9,500
400,000
450,000
500,000
550,000
600,000
650,000
EMA completed deals: 1 year trailing January – December 11
V a l u e ( U S $ m )
N u m b e r o f d e a l s
Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11
No. of Deals Value (US$m)
13,000
13,500
14,000
14,500
15,000
15,500
600,000
650,000
700,000
750,000
800,000
850,000
900,000
950,000
1,000,000
We are forecasting a modest decline in
M&A for the rst six months of 2012.
the M&A recovery of thepast two years, especiallyas uncertainty over theEurozone crisis continues.We are not forecasting a
steep decline; deal activitywill likely be supported bycorporate cash, private equityand the availability of targetcompanies.
© 2012 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member frms o the KPMG network o independent frms are afliated with KPMG International. KPMG International provides no client services. All rights reserved.
Source: Thomson Reuters SDC/KPMG analysis
Note: Figures shown are totals for the 12 month period up to the specied date
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KPMG Global M&A team
The ability to create, enhance or preserve value iscritical in any economy. For many organizations, thismeans taking advantage of merger or acquisitionopportunities. We can support you – whether you
are on the buy side or the sell side – with services thatcover the full life cycle of a transaction.
The inormation contained herein is o a general nature and is not intended to address the circumstances o any particular individual
or entity. Although we endeavor to provide accurate and timely inormation, there can be no guarantee that such inormation is
accurate as o the date it is received or that it will continue to be accurate in the uture. No one should act on such inormation
without appropriate proessional advice ater a thorough examination o the particular situation.
© 2012 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member frms o the KPMG network o independent
frms are afliated with KPMG International. KPMG International provides no client services. No member frm has any authority to
obligate or bind KPMG International or any other member frm vis-à-vis third parties, nor does KPMG International have any such
authority to obligate or bind any member frm. All rights reserved.
The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks o KPMG International.
Designed by Evalueserve.
Publication name: M&A Predictor
Publication number: 120105
Publication date: February 2012
kpmg.com