Deal Drivers: EMEA FY 2020
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Deal Drivers: EMEA FY 2020 A spotlight on mergers and acquisitions trends in 2020 Contents Foreword: M&A recovers in EMEA on back of strong H2 03 Outlook: EMEA heat chart 04 All sectors 05 Consumer 14 Energy, mining & utilities 19 Financial services 24 Industrials & chemicals 29 Pharma, medical & biotech 34 Telecoms, media & technology 39 About this report 44 Foreword: M&A recovers in EMEA on back of strong H2 The COVID-19 pandemic and its impact on businesses and Hope on the horizon financial markets loomed large over dealmaking in 2020, Moving into 2021, the outlook for M&A activity is broadly but even in the face of extreme uncertainty EMEA deal value positive. The fourth quarter of 2020 registered higher deal only fell by 1% to €835.3bn, although deal volumes did see a value and volume than the same period in 2019—before the steeper decline of 15%. pandemic had any impact on the region. This level of activity could be sustained in coming months, especially as a backlog of deals planned for 2020 but put on hold due to COVID-19 A strong rally in the second half of the year are expected to reboot at the same time as new transactions helped to lift annual figures. Steadying come to market. stock markets and vaccine approvals in H2 2020 provided a more stable backdrop for Private equity firms still have large war chests to invest and the record sums of capital raised by special purpose corporates to return to dealmaking, with acquisition companies (SPACs) in the US are also set to have private equity firms eager to catch up on an influence on EMEA dealmaking, with a number of examples deployment programs after a pause during of US SPACs buying European companies already emerging. the first rounds of lockdown. Risks remain, with border controls and new strains of COVID still putting the brakes on economic activity, but after a Deal activity through the year was informed by a strong challenging 2020 there is cautious optimism that M&A sector theme. M&A in the technology, media, and markets will have a stronger year in 2021. telecommunications (TMT) sector proved especially resilient. Deal value and volumes both increased, to make TMT the most active sector for deals. This reflects the reliance on technology through lockdown periods, with buyers noting the sector’s ability to continue growing earnings despite wider disruption. 3 Outlook: Heat chart based on potential companies for sale EMEA heat chart UK & Ireland UK DACH France Nordics Italy & Iberia Benelux Middle Turkey, East & Africa CEE & SEE TOTAL Looking ahead at the next six months, the technology, media, TMT 81 97 33 52 67 35 86 133 584 and telecoms (TMT) and the consumer sectors are expected to experience the greatest level of M&A activity, according Consumer 65 58 37 25 110 45 43 80 463 to Mergermarket’s publication of ‘companies for sale’ stories over the second half of 2020. Industrials & chemicals 22 103 30 39 69 19 58 74 414 A total of 584 ‘companies for sale’ stories were published Business services 41 33 20 25 45 16 36 50 266 about targets in the TMT sector in the last six months of 2020. The CEE & SEE region is likely to see the most activity in this 61 24 16 17 37 14 43 33 245 sector, with 133 stories published, followed by the DACH Financial services region, which had 97 stories. Energy, mining & utilities 29 11 6 21 35 6 53 59 220 After a tumultuous year due to the challenges of the COVID-19 34 38 18 29 38 10 25 24 216 pandemic, the consumer sector is set to see strong activity in Pharma, medical & biotech 2021—a total of 463 stories were published about the sector, with Italy and Iberia the top region. Providers of essential Leisure 17 10 5 4 19 6 16 20 97 goods, like food and beverage, could take advantage of robust valuations and seek deals. On the other side of the spectrum, Construction 6 10 3 8 19 10 14 15 85 a number of distressed assets could come to market now that there is greater clarity on market conditions. Additionally, Transportation 11 6 3 2 19 3 10 23 77 companies in the sector may turn to M&A to shore up Real estate e-commerce capabilities. 8 6 5 6 6 19 18 68 Cold Warm Hot Traditionally a robust market, the industrials and chemicals Agriculture 2 2 1 2 1 2 15 32 57 sector of the DACH market is also expected to be among Note: The Intelligence Heat Charts are based on ‘companies for sale’ tracked by Mergermarket in the most active in the coming months—103 stories were Defense 2 1 1 1 5 the respective regions between July 01, 2020 and published about targets in the sector in this region. December 31, 2020. Opportunities are captured according to the dominant geography and sector TOTAL 379 398 173 229 466 172 419 561 2,797 Source:of the Mergermarket potential target company. 4 All sectors Dealmaking rebounds in H2 in spite of COVID concerns Despite facing severe uncertainty through the COVID-19 Much of the year’s activity was concentrated in the second All sectors M&A activity, dislocation period, EMEA M&A markets proved resilient half as stock markets recovered, lockdown measures eased, 2018-2020 in 2020. and COVID vaccines were approved. In H2 2020, deal value totaled €511bn from 4,080 deals, up from 3,289 deals worth €324.3bn in H1 2020. Q4 2020 was particularly active, with 2,500 350 IMF figures show a severe 7.2% contraction deal value for the quarter rising 52% on Q4 2019 figures to in European GDP in 2020 as a result of €309.8bn and volume up 6% to 2,367 deals. pandemic disruption, while the Middle 2,000 300 East and Africa saw declines of 3.2% Private equity was a major contributor to overall M&A activity levels as buyout firms, eager to deploy the US$2.5 trillion of and 2.6%, respectively. dry powder sitting in their war chests, continued to invest in €(bn) value Deal 1,500 250 new deals. Buyout value rose 15% year-on-year to €194.7bn, In the face of these macroeconomic headwinds, deal value for even as volume fell 6%, as firms successfully pursued large the year was only 1% down on 2019, coming in at €835.3bn. deals, including Cinven and Advent International’s €17.2bn Deal volume Deal Deal volumes fell 15% year-on-year to 7,369 transactions. carve-out of ThyssenKrupp’s elevator business. Exit activity 1,000 200 The top end of the market was especially active—there were was even stronger, with value rising by more than a fifth on the 28 deals worth €5bn or more over the course of the year, previous year to €175.2bn. Exit volume dropped by around a compared to only 16 the year before. fifth to 843 deals. 500 150 0 100 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2018 2019 2020 Deal volume Deal value €(bn) Source: Mergermarket 6 TMT value doubles thanks to demand spike All sectors top sectors by value I 2020 With regards to sectors, TMT proved the most fruitful industry EUR (m) for M&A activity. Technology companies were able to continue TMT 247,708 trading with minimal disruption through lockdown periods, Industrials & chemicals 122,907 with customers relying on their products to support remote Financial services 121,980 working, schooling, and entertainment. Energy, mining & utilities 119,584 Business services 50,281 EMEA TMT deal value more than doubled year-on-year from €121.8bn in 2019 to €247.7bn in 2020 as dealmakers All sectors top sectors by volume I 2020 made large investments in the sector. Notable deals in the space included SoftBank’s sale of UK-based semiconductor Deal count developer ARM to NVIDIA in a €32.5bn deal and Patrick Drahi’s TMT 1,640 investment in telecommunications group Altice Europe in Industrials & chemicals 1,326 a deal valued at €32.18bn, including net debt. Volume held Business services 1,067 steady, ticking up 3% to 1,640 deals. Consumer 787 Pharma, medical & biotech 587 The industrial and chemicals sector was the second largest by deal value with €122.9bn worth of transactions, although this All sectors top bidders by value I 2020 was 27% down on the €169bn of deals secured in 2019. EUR (m) USA 241,674 Like the TMT industry, the financial services sector also United Kingdom 110,103 recorded a strong rise in deal value despite headwinds. Deal France 109,289 value more than doubled to €122bn in 2020, lifted by deals Germany 39,220 including AON’s €31.1bn acquisition of Willis Towers Watson Sweden 38,165 in the UK and National Commercial Bank in Saudi Arabia acquiring smaller rival Samba Financial Group for €12.8bn. All sectors top bidders by volume I 2020 Despite volatile oil prices and falling demand through Deal count lockdowns, energy, mining, and utilities deal value climbed United Kingdom 1,073 from €109.9bn in 2019 to €119.6bn in 2020. Pharma, medical, France 795 and biotech deal value, however, dropped from €149.7bn USA 746 in 2019 to €41bn despite strong private equity interest and Germany 721 investment in the sector. Sweden 499 7 UK market active despite Brexit All sectors top 10 announced deals, 2020 In addition to the unprecedented upheaval caused by the COVID-19 pandemic, the region also faced considerable Announced Bidder company Target company Target Vendor company Deal value uncertainty due to the lack of agreement on the terms of the date dominant (€m) UK’s exit from the European Union up until the last few days sector of the year.