Private equity and M&A on the move


The M&A market is on the move. According to Mergermarket, global M&A was valued at US$599.1 billion in Q1 2014, up 33.2 percent from the same period last year. The average deal size over the same period was US$ 374.4 million, 33 percent greater than in Q1 2013. A closer look at the figures reveals an interesting trend: deal volume is slightly down, but deal value is up.

Fewer, bigger deals imply that investors are moving away from opportunistic purchases and focusing on larger, longer-term plays. For Oliver Brahmst, a partner in White & Case’s M&A practice group in New York, the reasons behind these trends are clear.

“On the buy side, the main driver of M&A in the past two to three years has been private equity (PE),” he says. “These players have a trillion dollars in equity to invest. Add a couple of trillion dollars of debt to that, and you’ve got a US$3 trillion war chest.” But now, with strategic investors returning to the market to make acquisitions, it’s a very different picture from just a short time ago, as Brahmst points out: “Six months ago, the CEO of a public company or an aligned strategic company may have been hard pressed to say where his customers would be coming from 12 months out. There was a lot of global uncertainty: political divisions in Washington, DC, issues in the EU, volatility in North Africa and the Middle East. For most of 2013, strategic investors were rather shy of stepping fully into an M&A deal.” On the sell side, IPO markets are experiencing increased activity from PE investors looking to exit.

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