by This year, all the world’s a stage…for mergers and acquisitions. So far in 2016, cross-border M&A has made up about 45 percent of total deal-making volume, well above the historical average of about 30 percent, Robin Rankin, Credit Suisse’s Co-head of Global Mergers and Acquisitions, noted at a recent M&A panel discussion hosted by the Milken Institute. A recent survey of executives in 45 countries suggests that there are more cross-border deals to come. The survey, conducted by EY (formerly Ernst & Young) found that 74 percent of companies have eyes on making foreign acquisitions in the next 12 months. M&A is “the only way to achieve growth in many corners of the world,” said panelist Steve Krouskos, Deputy Global Vice Chair, Transaction Advisory Services at EY. The panelists agreed that activist shareholders are an important part of the M&A landscape. “About 40 percent of companies that encounter activism end up doing some form of M&A transaction,” Rankin said. She added that activism is emerging more and more outside of the U.S., especially in Asian countries such as Korea and Japan as well as in Australia. Sometimes simply the potential of an activist campaign may spur corporate boards to make investments.
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Alice Gomstyn considers the following as important: activist investors, anti-trust, Credit Suisse, M&A, mergers and acquisitions, Milken Institute, Robin Rankin, World Affairs: Features
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This year, all the world’s a stage…for mergers and acquisitions. So far in 2016, cross-border M&A has made up about 45 percent of total deal-making volume, well above the historical average of about 30 percent, Robin Rankin, Credit Suisse’s Co-head of Global Mergers and Acquisitions, noted at a recent M&A panel discussion hosted by the Milken Institute.
A recent survey of executives in 45 countries suggests that there are more cross-border deals to come. The survey, conducted by EY (formerly Ernst & Young) found that 74 percent of companies have eyes on making foreign acquisitions in the next 12 months. M&A is “the only way to achieve growth in many corners of the world,” said panelist Steve Krouskos, Deputy Global Vice Chair, Transaction Advisory Services at EY.
The panelists agreed that activist shareholders are an important part of the M&A landscape. “About 40 percent of companies that encounter activism end up doing some form of M&A transaction,” Rankin said. She added that activism is emerging more and more outside of the U.S., especially in Asian countries such as Korea and Japan as well as in Australia.
Sometimes simply the potential of an activist campaign may spur corporate boards to make investments. “I’ve seen a lot of companies trying to understand how an activist or any outsider might look at the business to maximize value, which, in many cases, has been a healthy process,” said EY’s Krouskos.
Still, Rankin said activists’ influence in spurring M&A could slow as companies run out of obvious targets. Some statistics also suggest that activist campaigns, while generally lauded for generating short-term alpha relative to the overall market, are less effective at delivering long-run outperformance. Over the span of two to three years, companies subject to activist campaigns performed worse than their peers, according to a recent Credit Suisse analysis. “Maybe that’s because the companies were companies that weren’t doing well and maybe that’s why they didn’t perform…but it’s not clear that over a longer period of time an activist actually makes a stock perform better,” Rankin said.
One area ripe for more M&A is in the commodities space, where investors are searching for ways to make money off the volatility in the metals, mining and energy markets . The oil and gas industry, in particular, “is going through an extraordinary shift,” Rankin said. “As soon as there is some stability in pricing, there will be M&A activity and probably some restructuring.”
This year will be a good one for mergers and acquisitions, though it won’t be as strong as 2015 because of the slowdown in financing activity in the last quarter of 2015 and the first quarter of 2016. Buyouts, in particular, have declined, a trend that Rankin said might have to do with inflated valuations. Overall, however, CEO confidence is up, she noted.
“The confidence with which people want to pursue significant M&A transactions I don’t think has waned and so I think that we’re going to see the back half of the year be very strong for strategic transactions,” Rankin said.