M&A Index, Q1 2013 - Allen & Overy

The darkest hour is just before dawn – isn’t it?

M&A Index, Q1 2013 www.allenovery.com

2

The Allen & Overy M&A Index | Q1 2013

Contents

© Allen & Overy LLP 2013

3

Introduction – Global M&A trends – Q1 2013

4

Executive summary – The global picture – Top 20 global outbound acquirers and inbound target markets

6 8

In focus – European deal finance

10

Regional analysis – U.S. – Western Europe – CEE and CIS – Middle East and North Africa – India – Asia Pacific: Greater China – Asia Pacific excluding Greater China

14 16 18 20 22 24 26

A global snapshot – Top target markets for the world’s largest acquiring countries

28

Sector analysis – Energy – Financial services – Infrastructure & utilities – Life sciences – Private equity – Telecoms, media and technology

30 32 34 36 38 40

Top ten global outbound acquirers Q1 2013

42

Definitions

43

About the research

44

www.allenovery.com/maindex

4


Global M&A trends in Q1 2013 The darkest hour is just before dawn – isn’t it? If the pundits are to be believed, 2013 will see the long-awaited revival of global M&A transactions. Yet, with the possible exception of the U.S., Q1 tells a very different story. So what will it take to secure a recovery? The New Year broke with the press full of optimistic forecasts that 2013 would finally see a long-anticipated revival in M&A transactions, after almost five years of declining activity. We tend to believe that view, too.

So, in preparing this report, we have been asking ourselves two main questions – how do we square the forecasts with the evidence to date? And what exactly will it take to reignite deal activity across the globe during the remainder of the year?

Yet there is a major conundrum. Three months in, there remains little evidence that we are on the cusp of a recovery. Indeed, as our latest report on the state of global M&A markets (tracking deals worth more than USD100 million) shows, deal activity continues to fall across most regions and most sectors, with a few important exceptions.

As you would expect at a time of great complexity in global economic and political affairs, the answers are not simple and are subject to a wide number of caveats.

Q1 actually saw deal volumes fall by 23% against the same quarter last year (from 554 down to 370). Values fell by an even steeper 33% to USD321 billion (USD418bn). Not for the first time, we find ourselves pointing out that the number of deals has not been this low since the peak of the financial crisis – in fact, you have to go back to Q1 2009, just after the Lehman collapse, to find a quieter quarter.


Confidence that the market is about to turn is mostly coming from the state of play in the U.S., where, backed by increasingly strong economic fundamentals, the last two quarters have seen a genuine surge in big, mostly domestic, transactions. What started at the end of 2012 has continued in the first three months of this year, which, with the contentious proposed LBO of Dell (USD24.4bn) – the first since the financial crisis – and Warren Buffett’s USD23bn tilt at Heinz, to name but two transactions, has seen a return of the megadeal. Though such deals may not yet be an established trend, what they do show is a

growing ambition on the part of dealmakers. They also prove that deal financing on a significant scale is available for the right transaction. And yet small and mid-cap deals are noticeable by their absence in the U.S. market. Indeed, overall deal volumes and values fell there, too, in Q1. So where U.S. investors go next is a vitally important question. Will the spate of big deals spread confidence to smaller domestic investors? Will U.S. investors begin to turn their attention to other markets – Europe and Asia, in particular? Certainly we have noticed U.S. PE funds making their presence felt in Europe, and their interest does not appear to have been doused by the latest phase of the Eurozone crisis caused by the chaotic – and potentially game-changing – bailout of Cyprus. China also presents some potential sparks of optimism, now that the political direction of the country is becoming clearer with the appointment of a new president and a new tier of political and industrial leaders. The signals they are

5

23% decrease in the volume of deals compared to the same period last year (Q1)

33%

decrease in the value of deals compared to the same period last year (Q1)

34%

of activity by volume and 47% by value was in U.S.

USD321bn total value of deals in Q1 2013, compared to USD418bn for the same period last year

370

deals in Q1 2013, the lowest quarterly total since Q1 2009 (318 deals)

giving suggest not only a determination to manage growth more efficiently, but that China’s outbound investment story will once again pick up pace, led by the continuing search for raw materials, real estate investment and the growing need to access technology and strong brands to boost competitiveness at home. Japan presents a more contradictory reason for hope. The rapid depreciation of the yen since December seems to have caused a pause in outbound investment. But that could be temporary. Some think the currency could quickly bounce back, making deals more affordable again. And the need to secure LNG and to diversify out of the ageing domestic market is giving investors continued impetus, as is the sharp rise in equity markets. India’s determination to push through market reforms, despite the delays that are so often a function of its coalition politics, is already having an effect in key sectors and we are confident this will last up to and beyond elections later this year.

Even in key European markets, the fundamentals look increasingly favourable for dealmaking, notwithstanding the continued uncertainty around the euro and the likelihood that slow growth will remain the order of the day for some time to come. Our focus on the European deal financing scene shows that access to debt funding has greatly improved, even if traditional equity-based mechanisms, notably rights issues, remain out of fashion.

Andrew Ballheimer Co-Head of the Global Corporate practice, Allen & Overy Tel +44 20 3088 4252

All of this could bode well for activity in 2013, but it all depends on another vital element – economic and political stability. That can be blown off course in sudden ways, as Cyprus and the growing tension on the Korean peninsula show. For all that, we continue to be optimistic, even in the face of a pretty dismal Q1, that 2013 will, indeed, see a significant improvement in activity. As we all know: the darkest hour is the one just before dawn – isn’t it?


6


Executive summary The global picture – our key observations A number of key themes emerge from the statistics and analysis contained in this report. Having reviewed each region and sector in depth, here are our key observations about the state of the global M&A market in Q1 2013. Europe’s high yield markets continue to perform strongly as investors prove willing to shoulder higher levels of risk to chase better returns. Abundant investment grade debt financing is also now more readily available for the right deals and we are seeing the return of “stapled” deals in Germany. But more traditional equity-based routes to deal financing, notably rights issues, remain unpopular for all but the biggest of deals. Page 10. There were promising signs of revival in the U.S. market in Q1, with a return of the sort of megadeal the market had begun to think was a thing of the past. But despite this mini-boom in big transactions, the rest of the market remained noticeably quieter. The question is: will confidence at the top end become contagious and begin to trickle down during the rest of the year? Page 14. Despite strengthening fundamentals in a number of key Western European markets, confidence remains the key and that is proving pretty fragile. The Cyprus debacle has quickly rekindled fears about the future of the Eurozone, but it is too early to say if this will puncture an increasingly promising pipeline of deals. Page 16. Cyprus proved just as big a headache for transactions in the CEE and the CIS, not least because of the large exposure of Russian investors. In the short term it would not be surprising to see them focus on financial restructuring rather than M&A.


Despite a return of Eurozone jitters, several markets are showing signs of life, particularly Poland and the Czech Republic. Page 18. The Middle East and North Africa region continues to benefit from the strong fundamentals that drove a surge in activity in 2012. But political uncertainty and unrest in some markets will have a contradictory impact – seen by some investors as a reason to shy away, by others as an opportunity. Page 20. India is pushing ahead with some important market reforms, which are already having an effect on deals in key sectors, including retail and air transport. Ahead of elections, all three main parties appear united on a pro-growth stance and the continuation of liberalisation. That bodes well for a pick-up in activity. Page 22. The priorities of China’s new administration, and of its political and industrial appointees, are becoming increasingly clear and point to an acceleration of the country’s outbound investment story. Falling commodity prices are presenting opportunities for good natural resources deals around the globe, real estate is a potential new “hot spot” for overseas transactions, and the search for technology and strong brands that play well at home continues. Page 24. Despite the rapid fall of the yen against the dollar, Japan continues to excite most interest in an otherwise very quiet

Asia Pacific market, spurred on by rising equities, hopes the currency will bounce back and the need for Japan to explore new growth markets abroad. LNG remains a major driver for deals and investment across the region. Page 26. Churn rather than bold investment was the hallmark of an otherwise much quieter Q1 for energy and natural resources, although shale gas looks set to remain a major spur to transactions. Europe had been leading the way in financial services deals in Q1, but the Cyprus bailout looks set to cause ripples for some time to come. Infrastructure was one of the few sectors to see a good uptick in activity across key areas such as airports and utilities. With significant financing recently raised by funds, this activity should continue. Life sciences went the other way, however, with fewer deals this quarter than at any time since spring 2009, despite some interesting activity in the drug, injectables and retail markets. PE suffered a very slow quarter in almost every region, despite deal values being inflated by two U.S. megadeals and some sizeable transactions in Germany. TMT was the liveliest sector of all, thanks largely to the Dell, Liberty Global and Comcast transactions, all concentrated in the cable sector. It is not clear if the return of the megadeal is a trend; we fear not. Pages 30-41.

7

GLOBAL DEAL TYPES Demerger Divestment Joint venture Merger Other private M&A Public hostile acquisition Public recommended acquisition Take private

Deal type (proportion of 100%)

100 3.90%

Deal totals

1.84%

1.26%

1.03%

22.01%

22.47%

0.94%

0.21%

2.48%

1.62%

2.97%

1000

820 19.49%

80

0.56% 24.63% 0.37%

20.31%

20.76% 0.18%

20%

800

0.81%

708

645

60

600

554

485 33.65%

40

35.98% 0.98% 0.37%

42.37%

0.63% 0.31%

0.42% 0.14%

37.11% 0.62% 0.62%

35.68% 38.60% 1.09% 0.78%

41.16%

0.54%

400

0.72%

370 318

20

200

33.41%

0

34.46%

40.88%

36.70%

0.37%

0.71%

0.31%

1.24%

2007

2008

2009

2010

34.57% 2.17%

2011

35.20%

39.73%

0.36%

0.27%

2012

2013

See Appendix (separate document) for large format tables. The diagram above represents the breakdown of the total number of deals in Q1 from 2007 to 2013


0

8


Top 20 global outbound acquirers Top 20 global inbound target markets

5 6

Netherlands

9 9

Canada

17

5

UK

3

Ireland (Republic)

U.S.

37

5 4

France

24

3 4

Spain

Belgium Trinidad and Tobago

GLOBAL DEAL TYPES

Outbound acquisitions

Inbound target markets

These figures represent the total number of deals for Q1 2013.


1

2 3

Switzerland

3

2

5 Brazil

9

3

Denmark

8

4

3 2

Germany

Rank

Country

Volume of deals

Value of deals USDm

Rank

Country

Volume of deals

Value of deals USDm

1

U.S.

37

44,123

1

U.S.

24

13,182

2

Hong Kong

12

5,156

2

UK

17

27,333

3

China

9

9,537

3

China

11

3,890

4

Canada

9

5,969

4

Canada

9

4,940

5

Japan

7

4,280

5

Australia

9

3,828

6

South Korea

7

3,065

6

Germany

8

3,227

7

Netherlands

5

9,185

7

Hong Kong

6

2,646

8

UK

5

2,575

8

Spain

4

1,906

9

Switzerland

5

2,396

9

France

4

1,447

10

France

5

1,200

10

Ireland (Republic)

3

5,161

11

Germany

4

1,253

11

Singapore

3

3,687

12

Australia

4

534

12

Belgium

3

878

13

Singapore

3

2,643

13

Japan

3

795

14

Luxembourg

3

2,008

14

Netherlands

2

2,762

15

Denmark

3

1,489

15

India

2

1,748

16

Spain

3

824

16

Italy

2

1,608

17

Brazil

3

374

17

Israel

2

701

18

Belgium

2

751

18

Greece

2

363

19

Saudi Arabia

2

607

19

South Korea

2

303

20

Bahrain

2

350

20

Trinidad and Tobago

1

6,700

7

Luxembourg

2

Greece

2

Israel

Bahrain

2 2

7

9 11

Italy

2 Saudi Arabia

India

Singapore

12

6

2

South Korea

3

Japan China

Hong Kong

3 3

4

9

Australia


10


European deal finance High yield role grows in Europe’s testing deal scene

At a glance...

With investors chasing better returns, high yield bonds are an attractive option to fund transactions and refinancings. But more traditional equity-based financing tools have gone off the boil, and show little sign of revival.

– Appetite for higher risks and higher yields grows – Bank lending increases for the right deals and borrowers – Brighter German PE sector sees growth of stapled deals – Rights issues lose their appeal Europe has not had much growth to shout about since the height of the financial crisis in 2008 – and most commentators agree it must live with stagnant growth for some time to come. That is having an inevitable effect on Europe’s transactions market. But not everything is moribund and one extraordinary result of the crash has been the rapid expansion of Europe’s high yield bond market, both in refinancings and in M&A deals. 2012 was a very strong year for the market, coming close to a record-setting 2011, which, in turn, was just ahead of a powerful performance in 2010. Growth has been driven by a number of factors, most notably the banks’ decision to rein in their lending, which has forced companies and private equity firms still needing to raise capital to look elsewhere. Investors, frustrated by the low returns on offer in other parts of the market, have also been willing to shoulder higher levels of risk to chase bigger yields, and these below


investment grade bonds provide a useful, if more precarious, alternative. Refinancing activity has been the major driver of the market. With many credits unlikely to hit their maturity wall until 2015 or even 2016, it is likely that this activity will continue for a while longer. Although some commentators have recently suggested the high yield market may be peaking, we continue to believe it has considerable life in it yet. That is also partly because we are seeing a new trend in the market, with high yield increasingly being used to fund or part-fund M&A transactions as well as refinancings. Sellers are increasingly using dual-track transactions – an IPO and M&A disposals – to make an exit. In some cases, they are also opting for a triple-track approach, with the addition of a high yield recapitalisation. For buyers, high yield is also an increasingly attractive funding option. With banks under continuing pressure to boost capital and the impact this is having on

their lending capacity, it would seem safe to assume that traditional bank-lending markets would be at a low ebb. In fact, Europe’s investment grade lending markets are definitely open for business and it is now much easier to raise finance for deals than in the immediate aftermath of the financial crisis. Whereas dealmakers would have struggled to raise EUR10bn in 2009, it is now possible to raise two to three times that amount. Not for everyone, of course. The crucial swing factor is the quality of the transaction. Banks are willing to get behind the right deals and the right borrowers, such as Liberty Global’s acquisition of Virgin Media. Others will still struggle. Spotting precise trends remains difficult, however, at a time when deal volumes are so low. For instance, what impact have the changes to the UK Takeover Code had? Have they pushed up the price of debt as expected and has that changed the way in which business is financed? Those are still unknowns that we won’t see clarified until transactions return. But some key markets do provide useful indicators. Germany, in particular, saw a number of high-profile deals by strategic investors in 2012, often cross-border and often outbound. Standout transactions included SAP’s USD4.3bn acquisition of the U.S. cloud computing group Ariba, Linde’s USD3.8bn acquisition of the U.S. group

11

“one extraordinary result of the crash has been the rapid expansion of Europe’s high yield bond market”

Lincare and Siemens’ GBP1.7bn acquisition of Invensys Rail in the UK. A number of trends are emerging from such strategic deals. Often they will be structured as a bank bond deal, combining a loan and high yield. Some investors have taken advantage of favourable market conditions and gone for a recapitalisation via a general bond issue, then used the proceeds to fund transactions. In the German private equity market – which saw a pick-up in both buy and sell activity in the second half of 2012 – there has also been a return of so-called “stapled” deals. Here, the buyer has a certain amount of time to raise the financing on its own terms, before being forced to accept funding put in place by the seller’s own bank. Given the continuing volatility of share markets, equity-based transactions remain far more problematic, however. When share

prices are gyrating, it is hard to place an appropriate or agreed value on share for share deals. And, as we saw with the Glencore/Xstrata deal, shareholders can also quickly become embroiled in arguing over correct relative valuations – neither boards nor shareholders want to see shares being issued too cheaply. That is the main reason why we have seen rights issues fall down the list of favoured acquisition funding routes in the last five to six years. Having once been a very popular financing tool, particularly in the UK, they now tend to be seen as inflexible, requiring greater amounts of documentation and longer lead times.

That was the case with both G4S’ failed attempt to buy ISS and the Prudential’s bid for AIA. The rights issue was not the sole or even main reason why these deals failed. But use of this mechanism only exacerbated wider shareholder discontent over valuation and deal structuring and both deals consequently fell by the wayside.

“Europe’s investment grade lending markets are definitely open for business”

Rights issues will still be used in large, so-called “bet the farm” transactions. But even here, they can often make an already cumbersome deal process trickier.


12


Deal financing across the Asia Pacific region Chinese banks continue to have deep balance sheet capacity to assist with Chinese corporates executing outbound M&A transactions. The competition for these transactions can be fierce among banks and a handful of the international banks have been able to tap into these transactions. There has been an increasing trend towards take privates of Chinese businesses listed in New York. Appetite among international and domestic lenders for the relatively small number of big-ticket, high-profile strategic transactions, both within the region and outbound to Europe and the Americas, is very high, while there is a greater degree of hesitancy when looking at more complex jurisdictions or esoteric structures in the mid-market.

Meanwhile, there is a commonly held view that the well capitalised Japanese banks will have firepower to fund outbound M&A by Japanese corporates who are looking to find growth opportunities further afield than the shrinking and ageing Japanese economy. However, this seems to be happening slower than might have been expected, possibly due to the recent depreciation of the yen.

recent acquisition in the Maldives. The international PE firms are able to execute deals in countries where they have become comfortable with the economic and legal risk, but (with limited exceptions) some jurisdictions such as Indonesia and Vietnam remain, for many, a step too far. If overall market conditions continue to improve, we expect that this may change over the course of the next few years.

Private equity M&A in the region is still patchy, even in the more familiar territories such as Australia. In jurisdictions which are more challenging politically and legally, deals presented by the larger, global sponsors are likely to have a greater degree of success – for example Blackstone’s

Exits through IPOs is now looking more of a likely prospect, which may well have a positive impact on the market in the region overall.

The robust liquidity in the debt markets is supported by strong demand for collateralised loan obligations. This is permitting more highly leveraged deal structures.

Warren Buffett’s Berkshire Hathaway agreed to provide USD8bn of 9% preferred stock financing for the acquisition of Heinz. Koch AG Investment (a subsidiary of Koch Industries) also agreed to provide USD240m of nonvoting preferred stock financing to help take American Greetings Corporation private (with the remainder of the deal being financed by USD600m in committed debt as well as cash on hand).

Deal financing in the U.S. The U.S. acquisition finance market remains quite healthy. Banks are willing and able to lend, and the high yield market is also open. Investor appetite for yield has provided strong support and has enabled reasonably aggressive deal structuring. The announcement of the proposed Dell LBO – requiring USD28bn in debt and equity financing – demonstrated the depth of the market. The Dell financing, which includes equity investments from Michael Dell and Silver Lake Partners, includes a USD2bn 7.25% unsecured subordinated note placement with Microsoft. The conventional debt financing to be provided by the bank group amounts to USD13.75bn (including secured term loans and an asset-backed revolving credit facility). The acquirers also expect to issue up to USD3.25bn of first and second lien notes in a Rule 144A transaction.


On 12 March 2013, Moody’s announced that the three-month rolling average of Moody’s Covenant Quality Index for North American high yield bonds reached a historical low. In particular, Moody’s noted the increasing proportion of high yield “lite” bonds being issued that lack either a restricted payments covenant, a debt incurrence covenant – or both. A new feature of the U.S. acquisition finance markets is the willingness of cash-rich investors and corporates to step up for large components of the financing required for an acquisition. In addition to the Microsoft investment in the Dell deal,

In addition to the acquisition finance activity in the market, companies with existing debt outstanding have been taking advantage of current market conditions to execute refinancings.

13


14


Regional analysis: U.S. Big deals are back

At a glance...

The U.S. M&A market showed promising signs of revival in the first quarter of 2013, including the return of the megadeal, but it remains to be seen whether the activity at the top of the market will trickle down. – Strong fundamentals continue; political fears abate for now – Big corporates lead the charge with strategic megadeals – Non-megadeals noticeably quiet – IPO market perks up and energy stays busy The U.S. kicked off the new year with a mini-boom in M&A transactions as market participants took advantage of the strong underlying fundamental conditions, including interest rates near 0%, buoyant equity markets and strong reserves of corporate cash on the books. While these conditions are not new this quarter, the resolution (or at least deferral) of political and fiscal battles in the U.S. has provided an environment in which they can take effect. Confidence can be contagious. Large corporates are paving the way with strategic megadeals that have been well received by the market. These megadeals include Berkshire Hathaway’s joint cash and debt bid with 3G Capital Management to swallow Heinz for USD23bn, Comcast’s accelerated second-stage buyout of NBCUniversal (acquiring the remaining 49% from GE for USD16.7bn), Liberty Global’s USD16bn acquisition of Virgin Media and the USD11bn American Airlines and U.S. Airways merger. This quarter also brought the announcement of the first mega-LBO since the financial crisis, disproving sceptics who thought that they


would not return. Michael Dell and PE firm Silver Lake Partners announced a highly leveraged USD24.4bn buyout of Dell. The fact that the deal appears readily financeable despite the strategic challenges facing Dell demonstrates the depth of the financing capacity in the current market. The Dell deal also illustrates the growing influence of activist shareholders. Several big investors, including Carl Icahn and Southeastern Asset Management, have been very vocal in their objection to the deal on the basis that it undervalues the company, and Icahn and Blackstone submitted competing proposals during the “go-shop” period. Blackstone’s offer may signal a departure from the pre-crisis etiquette that PE firms do not generally enter bidding wars with each other. Shareholder activism is also enforcing corporate strategic focus to an unprecedented extent, which should lead to more spin-offs and divestures. For example, under intense pressure from activist investor Elliott Management, Hess recently announced its plan to sell off its retail and refining operations to focus on its oil products.

While the megadeal activity is encouraging, the dearth of mid-size and smaller deals is not. The total volume of deals in the U.S. for the first quarter was at its lowest point since the third quarter of 2009, and despite the megadeals, the total value of deals in the U.S. for the first quarter was at its lowest point since the first quarter of 2012. Despite the overall low number of deals, some sectors are vibrant, including real estate/ housing, insurance and asset management. In addition, the energy sector remains reliable for dealmaking. In the first quarter, Kinder Morgan Energy Partners announced its all-stock USD3.2bn purchase of Copano Energy, and Linn Energy announced its USD2.5bn acquisition of Berry Petroleum, demonstrating a continuing appetite for domestic shale gas. It was also a notable quarter for the U.S. IPO market, which has been relatively quiet since the disappointing social media offerings in 2012. Companies outside of the tech sector are making a splash, including SeaWorld, which is expected to go public soon, and Norwegian Cruise Line, which went public in January for USD450m. There have also been some pharma/healthcare IPOs, with Bausch & Lomb filing to go public in March and Zoetis, Pfizer’s animal health business, raising USD2.4bn in the biggest IPO since Facebook last spring. Overall it has been an impressive first quarter in the U.S. from a long-term perspective. But it is too soon to tell to what extent the high-end activity will trickle down to the rest of the market. It is fairly clear, though, that we are moving in the right direction, and we remain optimistic about the prospects for the remainder of 2013.

15

U.S. DEAL TYPES Demerger Divestment Joint venture Merger Other private M&A Public hostile acquisition Public recommended acquisition Take private


100

Deal totals

3.09%

1.43%

1.48%

2.47% 5.56%

3.94%

300

7.55%

265

15.71%

80

18.56%

16.05%

2.86% 22.22%

17.17%

250

0.62% 22.05%

26.04%

198

194

200

60 162 30% 1.43%

135

28.35%

150

1.57%

40

127

41.92% 42.96% 35.85%

47.42%

2.02%

1.48%

100

51.85%

1.13%

0.62%

20

70

50

28.30%

0

1.13%

2007

30.81%

28.87% 2.06%

48.57%

31.85%

2.53%

28.40%

2008

2009

2010

2011

2012

43.31% 0.79%

2013

The diagram above represents the breakdown of the total number of deals in Q1 from 2007 to 2013.


0

16


Regional analysis: Western Europe Will Eurozone troubles puncture the pipeline?

At a glance...

There are signs of growing activity in the region, but investor confidence remains the vital ingredient. And with every twist in the Eurozone crisis, that is the first thing to fall away.

– Economic fundamentals looking stronger, despite low growth – Pipeline of transactions strengthening – Cyprus rekindles Eurozone fears – U.S. investors beginning to make presence felt Some way behind the U.S., the all-important fundamentals so vital to an M&A revival are slotting into place in parts of Western Europe.

economies, particularly Spain and Italy. How Russia responds is an open question.

While economic growth itself remains anaemic, there are other important positives. Equity markets are on the rise, companies and PE houses have plenty of cash, interest rates remain low, finance is available both in Europe and in the U.S. for the right transactions, and U.S. buyers are now aggressively hunting for attractive deals.

Overall activity remains quiet, but Q1 saw some solid (rather than inspiring) activity in the German market. Public deals remained relatively low in value, but interesting acquisitions included food retail chain REWE’s takeover of WASGAU Produktions & Handels AG, and Steilmann and Equinox’s planned takeover of rival fashion retailer, Adler Modemärkte.

A growing number of commentators forecast a resurgence of deals in 2013. Indeed, a good pipeline of potential transactions is building up, not least in Germany, the Netherlands and the UK, while prospects in France and Italy remain less certain.

Private deals also tended to be small and a number involved distressed assets, including toy producer Simba Dickie’s purchase of model railway maker, Märklin, and the sale of auto supplier Neumayer Tekfor to Amtek of India.

But confidence is key – and it remains fragile.

The PE sector saw bigger transactions, including Bertelsmann’s EUR800m purchase of the remaining 51% of BMG and KKR and Permira’s sale of shares in ProSiebenSat.1 to institutional investors. The IPO market continued to come back and, separately, a number of multi-billion euro M&A deals are in the offing, with Commerzbank, RWE,

After a brief lull, Eurozone worries have resurfaced, with the Cyprus rescue puncturing investor optimism. What’s more, the structure of the bailout – with big uninsured depositors (many from Russia) hit hard – has changed the rules of the game. That could spell big trouble for banks in Europe’s more vulnerable


Siemens and Deutsche Telekom all reported to be preparing major disposals. In the Netherlands – where access to finance remains tight – there was a pick-up in activity in March, after a quiet start to the year. Standout deals included CSM’s sale of its bakery division to Rhône Capital, in a EUR1.05bn deal, and the EUR3.7bn nationalisation of the SNS Reaal bank. U.S. PE houses are increasingly making their presence felt in auctions and we expect to see a spate of acquisitions in the Netherlands and in the UK, where 2013 has started very quietly. Companies offering access to global markets will be increasingly attractive targets as the year progresses. While the pipeline of deals in France is quite low, large listed groups continue to be active sellers of non-strategic assets. Examples include Lagardère’s sale of its EADS stake and Crédit Agricole’s sale of Crédit Agricole Cheuvreux to Kepler Capital Markets. Indecisive elections in Italy have created uncertainty, hitting deal activity. But we expect mid-cap and small deals to pick up, PE exits to increase and the sale of non-core bank assets to start again as institutions try to meet Basel III requirements. Standout Q1 deals included the Atlantia and Gemina merger, to create one of Europe’s largest infrastructure groups, and Salini taking full control of rival building group, Impregilo. CVC Capital Partners also completed a secondary buyout of Cerved Group from Bain Capital and Clessidra.

17

Western Europe DEAL TYPES Demerger Divestment Joint venture Merger Other private M&A Public hostile acquisition Public recommended acquisition Take private


100

2.45%

Deal totals

2.36%

1.23%

2.34%

1.18%

0.71%

1.22%

250

245 14.62%

212

80

0.47%

9.76%

9.38%

1.22% 14.79%

17.28%

16.31%

200

21.22% 0.41%

169

60

150

141 128

38.27% 1.23%

36.33%

40

1.22%

43.75% 0.78% 0.78%

42.68% 43.20% 0.59% 1.18%

43.87%

100

45.39% 0.71%

82

81

50

20

0

38.37%

2007

38.21% 0.47%

2008

41.98%

2009

40.63%

36.69%

2.34%

2.37%

0.71%

2010

2011

2012

36.17%

45.12%

2013



0

18


Regional analysis: CEE and CIS The Cyprus effect

At a glance...

The Cyprus bailout has brought the Eurozone crisis back out of the shadows, making the deal market jittery again. But the biggest implications for transactions could be felt in Russia as big investors focus on financial restructuring rather than M&A.

– Cyprus revives Eurozone jitters – Russian investors likely to shift attention from M&A – Pipeline of deals provides reasons for optimism – The Polish M&A market remains buoyant Cyprus is one of the Eurozone’s smallest economies. Yet its chaotic rescue from the teeth of bankruptcy is likely to have big and far-reaching implications, not least for some of Russia’s most powerful investors and wider confidence in the Eurozone. Reported to hold about a third of all deposits in troubled Cypriot banks, Russian investors are clearly a main target of the rescue package which includes a punitive tax on all deposits over EUR100,000. It is entirely likely they will seek to pull their cash out of Cyprus in favour of a more stable haven and there could well be frostier relations between Russia and European inbound investors. It is too soon to say how this will impact M&A activity. But it is likely to have a short-term effect while big Russian businesses focus on financial restructuring rather than transactions, at a time when Russian activity is already relatively quiet. Q1 continued in that vein, with only a few, mainly domestic, standout transactions, including the government-backed deal


giving Holding MRSK a controlling stake in the Federal Grid Company. Inbound investment remains at a low ebb. Elsewhere in the region, the Cyprus debacle has rekindled the Eurozone jitters – just as investors were beginning to think the worst was over. Yet there is a general sense of optimism that deals could pick up in key markets in the months ahead, after a very slow 2012. In some southern European countries, for example, there is now a sizeable pipeline of deals in key sectors, notably TV, media and financial services. Five years after the financial crisis, PE houses are reaching the maturity wall on some investments and will be anxious to sell, even if at a slight loss. Energy remains a vibrant sector in the Czech Republic. RWE’s sale of Net4Gas is back on track, with Allianz of Germany and Borealis of Canada pipping the Czech energy holding company EPH to the post with a EUR1.6bn bid.

Other deals in prospect include electricity supplier CEZ agreeing a supply deal with Czech Coal, which could include the sale of a generating plant to the coal producer, and Alpiq of Switzerland ready to sell two power stations. Elsewhere, Cisco acquired Prague-based Cognitive Security for an undisclosed sum, there was growing activity in heavy manufacturing, and Czech Airlines was finally part-privatised, with Korean Air buying a 44% stake for just USD3.4m. Hungary continues to be a tricky place to invest. Attention is therefore focused on the government’s attempts to buy key assets to boost its economic influence ahead of upcoming elections. The nationalisation of the gas grid, currently owned by E.ON, has not yet completed, but the government is rumoured to be interested in Bombardier Hungary, the rail carriage maintenance business, Budapest Airport and certain banks. Poland continues to see relatively strong activity, with the largest deal being the sale of LUX MED, the largest private provider of health services, by funds managed by Mid Europa Partners to BUPA in a EUR400m deal. The prospects for the rest of the year are mixed, with not that many deals in the pipeline for private M&A. We expect more activity in the public M&A arena, with valuations going down and PE houses starting to look more aggressively at listed targets.

19

CEE AND CIS DEAL TYPES Divestment Joint venture Other private M&A Public recommended acquisition


Deal totals

100

60

3.03% 12.96% 9.80%

54

15.79%

80

15.79%

50

51

29.17%

40 60 42.42%

33

20.83%

30

36.84%

43.14% 1.96%

24

46.30%

40

57.14%

47.37%

20 19

19 14

20 10

0

45.10%

40.74%

36.84%

47.37%

54.55%

50%

42.86%

2007

2008

2009

2010

2011

2012

2013



0

20


Regional analysis: Middle East and North Africa Volumes and values remain strong, despite quarter over quarter declines

At a glance...

Vital ingredients for successful transactions, which fuelled the MENA region’s increased activity in 2012, have endured into 2013. However, these fundamentals were met by a series of contradictory trends, most relating to significant political and economic uncertainties.

– Deal volume and value down from Q4 2012 but in line with Q1 2012 – Average deal size strong on the back of few large deals – Opportunities in the wider region still attract well funded strategic buyers – Persistent volatility creates both opportunities and trepidation

The environment for dealmaking has, generally, been steadily improving against the backdrop of strong economic fundamentals globally and particularly in the MENA region.

In addition, OCI NV announced its USD9bn public takeover offer for Eygpt’s Orascom Construction Industries SAE and a simultaneous listing on NYSE Euronext Amsterdam.

Predictably, Q1 saw a drop from the recent high-water mark of Q4 2012 – not unusual in the first quarter of the financial year. But the drivers of 2012 deal activity continue, including low interest rates, strong reserves of corporate and private equity cash, a wealth of targets at increasingly attractive prices, and the need for companies to find new paths to growth after a protracted downturn in leading markets.

This was one of three large deals involving Eygpt, alongside Société Générale’s USD2bn sale of National Société Générale Bank SA to Qatar National Bank and BNP Paribas SA’s announced sale of BNP Paribas Eygpt to Emirates NBD PJSC. Saudi Arabia, too, is seeing an increase in activity both in terms of outbound and inbound investment.

These drivers fuelled deal volume and value in line with the results of Q1 2012, which, itself, saw the highest aggregate value of M&A deals since 2007. Despite continued regional political uncertainty, Q1 2012’s average transaction value increased from Q4 2012 on the back of a few big-ticket transactions, including the USD3bn merger of Abu Dhabi’s two largest property developers, Aldar Properties and Sorouh Real Estate.


The region remains one where inherent political instability drives change. Some will see the often unpredictable change as a deterrent, while others will seek to take advantage of the volatility and resulting market inefficiencies. Many significant restructurings have recently been concluded or are nearing completion and most will envisage realising existing investments through M&A. This should drive further transactions this year, coupled with traditional regional catalysts – strong demographic indicators, sustained oil prices, infrastructure spending and government-backed consolidation.

Opportunities abound for bold multinational corporates and financial players looking to take advantage of these factors. For instance, better links between the region and China should continue providing exciting openings for the remainder of 2013, exemplified by our recent work with Huawei, the world’s largest telecom equipment maker, which has already completed deals in the region. Other major Chinese businesses, including the Industrial and Commercial Bank of China, have also said they are seeking acquisitions here. Likewise, a number of GCC firms are interested in making acquisitions in China as the two regions become strategically closer. Further afield, Turkey, with its growing population and geographic positioning between Europe and the Middle East, looks set to continue playing a central role in the regional M&A market, attracting continued strong interest among GCC trade and private equity investors. While GCC countries (in particular the UAE, Qatar and Saudi Arabia) are likely to retain their lustre for international investors, continuing political uncertainty in countries such as Libya, Egypt and Iraq may either deter foreign investments or drive increasing activity – volatility creates opportunities, if not always for the most constructive reasons. To temper optimism, ongoing regional tensions and an expected decline in oil prices may result in regional businesses becoming more cautious. Again, political risk will be a deterrent to some, while others will focus on the opportunities created by uncertainty.

21

MENA DEAL TYPES Demerger Divestment Joint venture Other private M&A Public recommended acquisition


Deal totals

100

20

12.50%

11.11% 13.33%

16

80

15

15

27.27% 30%

60

11 37.50%

50%

20%

10

10 10%

9

40 53.33%

55.56%

7

16.67%

71.43%

6

5

20 30%

0

63.64%

50%

33.33%

33.33%

33.33%

10%

9.09%

2007

2008

2009

2010

2011

2012

28.57%

0

2013



22


Regional analysis: India Liberalisation holds key to growth

At a glance...

Coalition government makes for slow decision-making, and, in India’s case until recently, policy paralysis. But reforms are now being pushed through which should increasingly lift M&A transactions – and this year’s election promises continuity, whoever wins. – Government puts liberalisation words into action – This year’s election promises continued pro-growth stance – Retail and aviation see first foreign investment – Outlook bright despite asset overpricing fears The dynamic growth of India’s economy has come despite the frustrations of slow political decision-making, which in India has been a traditional side effect of coalition government. In recent years, many investors have complained of economic policy paralysis. Yet that has changed. The current government has won growing plaudits for pushing through far-reaching market reforms that will act as a real spur to both inbound and domestic M&A transactions and may even lift activity back towards the boom times of a few years ago. The outcome of elections later this year remains uncertain. But investors are taking heart from the fact that whichever of the three main parties forms the next coalition, all are pretty united in being pro-investment and pro-growth. So continuity, rather than disruption, looks to be on the cards. Some recent reforms showed their effects in Q1. Relaxation of foreign investment limits in both airlines and retail had an immediate


effect. Etihad, as expected, made an investment in Jet Airways said to be worth up to USD350m, but not before AirAsia and Tata announced a joint venture to launch a new Indian domestic carrier. In retail, IKEA and Carrefour are leading the charge, with M&S also said to have sought agreement to launch a multi-brand food and grocery business rather than its usual franchised clothing model. The quarter also saw some significant strategic deals by Indian and overseas investors. Standout deals included the proposed bid by GeoPost, France’s postal service, for stakes in two Indian courier companies, DTDC and DPD, which awaits regulatory approval, and Diageo’s acquisition of a controlling stake in United Spirits for USD2.1bn, which was cleared by the competition authorities in March. Another important deal was Thomas Cook’s acquisition of 74% of IKYA Human Capital Solutions. Liberalisation has helped domestic public deals, not least the more flexible provision that companies can acquire stakes of up to

25% without having to extend the offer to all shareholders. Deferral of tough new anti-avoidance tax rules to 2016 has been widely welcomed and a new company law bill has cleared the lower house and must now pass through the upper chamber. Elsewhere, India is considering setting up a secondary market to make it easier for PE firms to make exits and small companies to raise investment. Key sectors in the coming months are likely to be retail, IT and IT-enabled services, finance (particularly insurance), manufacturing and hospitality. Outbound, we expect the renewable energy industry to be active, especially in Africa. But increasingly, investors are concentrating on the quality of assets and whether they promise good returns or interesting synergies, rather than targeting specific sectors. U.S. PE houses dominate the financial investment scene, but we expect to see increasing numbers of strategic inbound investment from other markets, including Europe, the Middle East, Japan and Korea, as the year unfolds. There are lingering worries that Indian companies are overpriced, hampering some from raising necessary finance. But on balance, we believe the transactions outlook is brighter now than it has been for several years.

23

india DEAL TYPES Demerger Divestment Other private M&A Public recommended acquisition


Deal totals

25

100 7.69%

22

18.18%

80

20

22.22% 25% 29.41% 31.82%

17

16

60

15 38.46%

13

11

40

10

9

41.18% 40.91% 75%

55.56% 56.25%

20 72.73%

0

5 4

46.15%

22.22%

27.27%

9.09%

7.69%

29.41%

18.75%

25%

2007

2008

2009

2010

2011

2012

2013



0

24


Regional analysis: Asia Pacific: Greater China Balancing growth with better governance

At a glance...

China is emerging from a period of political uncertainty, as a new administration stamps its mark on the country’s future priorities and its deal-hungry state-owned enterprises. 2013 promises to be a much livelier year for M&A activity. – Positive political and economic signals from new leadership – Growth – but not at any cost – Resources deals pick up, with focus on shale – China’s real estate sector targets U.S. With Xi Jinping now installed as President, and with many political appointments at the top of China’s state-owned enterprises now made, investors are getting some much-needed clarity about where China is heading. So far it has been a case of interpreting the early pronouncements of the new political and industrial appointees. It remains to be seen how words translate into action. But the initial indications are good. Perhaps some have learned the art of political “spin”, but this does look like a set of leaders that wants to do politics better. The accent is on good governance, greater transparency, efficient bureaucracy, and a clampdown on corruption, including lavish business entertainment. The signals on economic growth are positive too, although there is plenty of chatter about China bubbles. The administration wants to keep the economic engine turning, but seems prepared to countenance a slightly reduced growth rate if that helps avoid, for instance, an environmental or food safety shock. Beijing and other major cities have suffered intolerable pollution this winter. Consumers are demanding greater rights.


The new government seems ready to respond – the only question is whether entrenched interests can be persuaded to join the sustained effort needed to bring about change. All this will have an impact on China’s continuing M&A story. Q1 was relatively quiet, but behind the scenes, M&A strategies are being developed and targets assessed. We expect the rest of 2013 to be much livelier and a number of trends are emerging. China’s search for raw materials to fuel its growth is continuing. A number of international investors who bought energy and mining assets at the top of the market have been hit by falling commodity prices and are now looking to sell out. This is presenting Chinese investors with a range of attractive deals across the world, many focused on the shale gas technologies needed to exploit China’s own huge reserves. Q1, for instance, saw China National Petroleum pay USD4.2bn for a 28% stake in ENI East Africa and sign a cooperation agreement with ENI to study shale gas in China.

Following clearance of CNOOC’s Nexen bid by Canadian regulators, the water has been tested. China Petrochemical has just paid USD1.02bn for a stake in Chesapeake Energy and Sinochem bought a 40% stake in Pioneer Natural Resources, both shale gas transactions. China’s real estate companies are facing leaner times following concerted efforts to cool an overheating domestic market and are looking for growth abroad. There has long been talk of a Chinese assault on the U.S. market, where property and finance are currently abundant and cheap. China Vanke, China’s biggest property developer, may be in the advanced guard, having completed a USD620m deal with Tishman Speyer in February to build two luxury apartment blocks in San Francisco. China’s inbound market remains much quieter and the majority of deals in Q1 were between domestic players. Despite the revival of the Eurozone crisis, Chinese companies are still keen to do deals offering access to technology or attractive brands that can boost their competitiveness at home. That was the model for last year’s tie-up between Sparkle Roll, the Chinese luxury goods distributor, and Bang & Olufsen, the hi-fi maker, and we expect to see more of the same in 2013. We also saw the emergence of Chinese outbound private equity last year and, as capital continues to flow out of China, this trend should continue.

25

greater china DEAL TYPES Demerger Divestment Joint venture Merger Other private M&A Public recommended acquisition Take private


100

Deal totals

80

3.28%

5%

11.11%

70 19.51%

80

61

20%

25%

26.23%

24.44%

60

60

26.67%

38.46%

60

50

24.39% 21.88%

45

40

28.33%

41 39

40 32

36.07%

45

1.67% 1.67%

31.11% 2.22%

22.22%

30

25.64%

20 20 10 50%

0

34.43%

2007

56.10%

2008

3.13%

2009

35.90%

43.33%

42.22%

40%

0

2010

2011

2012

2013

The diagram above represents the breakdown of the total number of deals in Q1 from 2007 to 2013


26


Regional analysis: Asia Pacific excluding Greater China Confidence, stability and U.S. deals top wish list

At a glance...

The region’s deal markets defied expectations and continued to flounder in Q1, with little inbound investment. Despite the rapid fall of the yen, it could still be Japan that leads a revival in activity as the year unfolds. – Investors take cover again, despite strong 2012 close – Falling yen may not hinder rising Japanese outbound deals – LNG demand continues to drive Asian transactions – Investors look to U.S. for green light A surge in transactions in late 2012 – mostly in the U.S. – suggested a positive pattern had been set for the start of 2013. But across this region the opposite was true, and investors scurried back under cover in Q1. That is not altogether unsurprising. Markets here can be quiet at the start of the year, with little getting done between Christmas and the Chinese New Year. But it is hard to pretend the current slowdown is all down to a festive go-slow. Things have not been so quiet since the height of the financial crisis. Surprisingly, Japan continues to excite interest, despite a slowdown this quarter in outbound deals and the yen’s dramatic 20% drop against the dollar since a new government took office in December. The falling yen makes outbound deals more expensive and would suggest a slowdown in outbound M&A. But there are good reasons why this may be just a temporary pause. Japanese companies, facing a demographic cliff at home, need to access new growth markets urgently. Some are looking to build non-core activities in new markets, as


witnessed in Q1 by MSG-maker Ajinomoto’s USD175m acquisition of the U.S.-based biopharmaceutical company Althea Technologies. Brewing giant Kirin recently reported a 2% fall in domestic alcohol sales, but 27% growth in its overseas beverages division. Some believe the yen could partially rebound quite soon. Consequently, the current pause in transactions may be linked to corporations holding fire for a few months to see if outbound deals can be done more cheaply it the currency snaps back. Corporate confidence is also being buoyed by sharply rising equity markets, with the Nikkei 225 up by over 35% since mid-November. Inbound M&A opportunities could also arise as Japanese companies dispose of non-performing businesses and outside acquirers take advantage of the weak yen. The oil and gas sector continues to see activity, partly down to traditional churn, as companies restructure their portfolios, as we saw with Hess’s intended disposal of interests in Thailand and Indonesia in Q1.

Elsewhere, the need to secure supplies of LNG for Asia is driving deals, as Japex’s acquisition of a 10% stake in the Petronas Canadian shale gas business, for an undisclosed sum, shows. Asian interest in African LNG ventures also continues to build, notably in Mozambique and Tanzania. Australia’s deal scene sputtered during Q1. The fundamentals are supportive of M&A but the lack of macroeconomic certainty (not helped by growing political uncertainty) is causing many boards to hold off and an uptick may have to wait until later this year. The reduced level of acquisitions by Chinese investors continues but, again, this could be temporary. And we are still seeing massive non-M&A offshore investment in new projects such as the Queensland LNG projects Ichthys LNG and Roy Hill. Interest in the ASEAN region remains high, with some inter-regional deal activity and continued foreign investor interest. But challenges remain – not least foreign investment regulations in the Indonesian banking and mining sectors and a relative lack of genuine deal opportunities. With elections due in Malaysia and Indonesia, we do not expect to see much change soon. Overall, investor confidence remains at a low ebb. That could all change with a period of greater stability. And we continue to believe U.S. investors may soon turn their attention overseas, including to the Asia Pacific region. That could be the spark that reignites a real revival in activity.

27

asia pacific excluding greater china DEAL TYPES Demerger Divestment Joint venture Merger Other private M&A Public hostile acquisition Public recommended acquisition Take private


100

1.09%

Deal totals

0.80%

150

2.94%

4.30%

125

18.33% 1.67%

80

120

25.88% 30.40% 40.22%

26.47%

1.18%

25.81%

1.47%

2.40%

35.96%

92

60

93

89

90

85

1.09%

68

40

60

32.94%

31.18%

35.29% 28.26%

36.80%

1.09%

1.60%

60 46.67%

33.71%

1.47%

1.12%

30

20

36.47%

0

26.97%

28.26%

28%

32.35%

3.53%

2.25%

2007

2008

2009

2010

2011

38.71%

33.33%

2012

2013



0

28


A global snapshot Top target markets for the world’s largest acquiring countries Rank

Country

Volume of deals

Value of deals USDm

Rank

Country

Volume of deals

Value of deals USDm

1

U.S.

28

41,859

6

South Korea

7

3,065

2

Hong Kong

12

5,156

7

Netherlands

5

9,185

3

China

9

9,537

8

UK

5

2,575

4

Canada

9

5,969

9

Switzerland

5

2,396

5

Japan

7

4,280

10

France

5

1,200

u.s.

HONG KONG Volume of deals

3

5

Volume of deals

1

3

UK Canada Australia Germany Israel

China 25,435 2,098 Ireland (Rep) Mexico 2,014 Chile 1,438 India 701

1 1 1

2

Value of deals (USDm)

1

1

2 9

1

1 1 1 1

424 3,249 2,900 2,000 1,600

CHINA


3

China Macau Peru Singapore France

Australia 567 1,161 New Zealand U.S. 735 UK 537 South Korea 535

1

468 410 365 190 188

1

caNADA Volume of deals

Volume of deals

3

1 1

3

Value of deals (USDm) U.S. Hong Kong Mozambique Tajikistan Spain


3,267 1,248 4,210 505 307

1

5 1


1

U.S. Ireland (Rep) Malaysia UK Australia

3,085 1,739 599 375 171

1 1

29

JAPAN

SOUTH KOREA Volume of deals

Volume of deals

1

2

1

3

3

1

1

Value of deals (USDm) U.S. Netherlands UK Hong Kong Germany


1,058 2,583 259 202 178

NETHERLANDS

1

uk Volume of deals

Volume of deals

1

1

1

1

1


1

715 596 1,100 654

U.S. Japan Canada China

1


1

6,700 2,131 144 105 105

Trinidad and Tobago Egypt Turkey Russia UK

1

Switzerland

1

1

1,488 638 180 165 104

Italy Gibraltar Denmark U.S. Australia

FRANCE Volume of deals

Volume of deals

1

1 1

1 2

2 Value of deals (USDm) Australia U.S. Germany Spain

914 1,000 374 108


1

Belgium Netherlands Ireland (Rep) UK

728 179 173 120

1


30


Sector analysis: Energy The hangover kicks in A boom of activity in Q4 combined with continuing political and economic challenges has resulted in a demonstrable slowdown of energy M&A in Q1 2013. Deals dipped in terms of both value and volume in the slowest Q1 in seven years.

––After a frenetic end to 2012 and the busiest Q4 in some years, many of the majors took a break from their previous pace of deal activity, giving way to a very quiet Q1 period. Political and economic challenges, including possible forthcoming tax reforms in Washington, may have encouraged players in the oil and gas sector to complete deals in 2012 ahead of future uncertainty. Political barriers also affected deal activity in the renewables space. In France, onshore wind power and solar projects remain logjammed due to lack of project financing as a result of a litigation pending before the EU courts on feed-in tariffs. Instead, investors are focusing on offshore wind power projects (four projects off the French west coast are in progress and a new bid process has just been launched for two additional projects) as well as underwater turbines projects which are also being considered. ––The broader energy sector does continues to see activity, as companies restructure their portfolios. In the Asian oil and gas market, Hess announced the disposal of interests in Thailand and Indonesia.


––Many major energy providers are also disposing of their non-core assets in Europe due to overcapacity in the region, decreasing incomes and deleveraging. Examples include Iberdrola’s disposal of its onshore wind farms to GE, EDF EN and Munich Re; Total’s disposal of TIGF; RWE launching the disposal of Dea (its gas and oil upstream subsidiary); as well as Enel and E.ON, who also announced major disposal programmes. ––Shale gas will continue to be a key driver in M&A activity in 2013. We expect majors to maintain interest in Australian shale opportunities (such as Chevron’s recent farm-in to Beach’s Cooper Basin shale interests) as the potential economies of scale continue to attract. Continuing funding constraints on small/mid-cap explorers will also create significant opportunities for potential buyers with strong balance sheets. In the Australian LNG sector, there is potential for ongoing divestments (or even further asset swaps) as participants realign their portfolios and form views, for example on preference for floating liquefaction

plants over traditional onshore facilities. Long-awaited consolidation among Queensland coal seam gas to LNG projects may also arise during the remainder of 2013, at least in relation to pipelines or other non-core infrastructure as proponents seek to deal with ongoing cost pressures. ––Elsewhere, Japex acquired a 10% stake in the Petronas Canadian shale gas business. This purchase highlights the continuing need to secure supplies of LNG for Asia, which we believe will lead to further significant activity in the remainder of 2013. For example, we have additionally seen Asian interest in African LNG ventures continuing to build, notably in Mozambique and Tanzania.

31

Total

33%

51

increase in value of deals compared to Q1 2012

47%

deals in Q1 2013

decrease in volume of deals compared to Q1 2012

ENERGY DEAL TYPES: Q1 2007-2013 Demerger

1.04%

10.42%

80

75

91

95

1.05%

15.79%

50 Deal type (proportion of 100%)

75

96

14.29%

17.58%

60

13.54%

1.79%

25

50 Deal number

96

18.42%

40

11.76%

1.96% 1.04%

1.04%

0

25

22.92%

26.79%

1.05%

20

27.37%

0

28.95%

54.74%

0

1.10%

48.35%

Q1 2007

76

56

Take private

Public recommended acquisition

32.97%

57.14%

Q1 2008

51

51.32%

1.32%

Q1 2009

Public hostile acquisition

63.54%

2.08%

Q1 2010

Other private M&A

23.53%

54.17%

Q1 2011

Merger

1.04%

62.75%

Q1 2012

Joint venture

29.17%

Q1 2013

Divestment

100 100

100

100

80

60

40

20

0


32


Sector analysis: Financial services Long shadow of the Eurozone returns to haunt the sector While Europe had been leading the way in financial services M&A in the first few months, the knock-on consequences of the events in Cyprus in late March will ripple through the sector for many months to come. ––Seemingly unable to break the pattern of recent years, Q1 featured yet another bailout of a financial institution, with the Dutch government rescuing SNS Reaal. But while SNS Reaal was being nationalised, an Irish institution was successfully returned to private ownership, with the government selling the Irish Life Group to Great-West Lifeco of Canada. As the first Irish institution to be returned fully to private ownership, with a full return on the investment for taxpayers, this was seen by many as a sign of the economy stabilising. ––Elsewhere, a subdued M&A market followed recent well rehearsed trends, including: ––Continued sell-offs of non-core assets driven by compressed margins, capital requirements and regulatory pressures. HSBC sold a large loan portfolio in the U.S., as well as HSBC Bank (Panama) to Bancolombia. BBVA (Chile) and ING (Brazil) also completed disposals as part of their ongoing programmes to sell non-core businesses. In Western Europe, Spain was busy, but expected activity in Italy failed to spark into life, a trend likely to continue as long as the political deadlock remains. ––Continued activity in insurance, with three of the deals in Spain and the two Latin American disposals mentioned above – BBVA (Provida Internacional) and ING (a stake in SulAmérica) – involving insurance businesses.


––Asset management and private banking remain bright spots. Rabobank completed the disposal of a 90% stake in its asset management arm, Robeco, to ORIX Corporation of Japan, while in the UK, Schroders agreed to acquire Cazenove Capital, bringing together two famous City of London names. Attracting new clients is hard in an adverse economic climate. Many believe consolidation in asset management is likely to increase, the longer the economic uncertainty persists. Private banking is arousing more interest in Asia as cumulative individual wealth grows across the region. ––The Asian market remains subdued, with a number of deals taking time to sign or close. This has been particularly acute in Indonesia, where Bank Indonesia has issued a number of new regulations and circulars on bank ownership and governance in the last year, creating uncertainty. DBS Bank’s proposed acquisition of Temasek’s stake in PT Bank Danamon Indonesia demonstrates this best. ––While several regulatory rulemakings were delayed in the U.S. – notably the Volcker rule and proposed capital regulations implementing Basel III – Europe’s much-awaited Capital Requirements Directive IV and the proposed Capital Requirements Regulation were published. The texts still have to be approved by the European Parliament (vote scheduled for

17 April 2013) and the Council. If officially published by 30 June 2013, the rules will apply from 1 January 2014. Although there could be some frenetic capital raising activity later this year, the new requirements will hopefully bring some stability to the sector, allowing banks to plan for future investment and growth. In the UK, the Bank of England’s Financial Policy Committee has already identified a capital shortfall of GBP25bn at British banks, to be raised by the end of the year. ––The Federal Reserve, OCC, and FDIC jointly published final supervisory guidance on leveraged lending, which covers transactions characterised by a borrower with a degree of financial leverage that significantly exceeds industry norms. The guidance focuses on the definition of leveraged lending, underwriting standards, valuation standards, pipeline management, reporting and analytics, risk rating leveraged loans, participations, and stress testing. This could have an impact on M&A volumes.

33

Total

28%

44

decrease in value of deals compared to Q1 2012

17%

deals in Q1 2013


financial services DEAL TYPES: Q1 2007-2013 Demerger

27.27% 1.45%

28.99% 16.13%

35.48%

1.61%

23.08%

96

121

60

80

90

Deal number


120

75

2.48%

0.83%

25

28.10%

60

1.04%

29.17%

1.04%

0

32.29%

28.10%

0.83%

35.42%

0.83%

40

30

1.61%

62

20

Take private

30.19%

1.45%

69

38.84%

1.04%

0

53

31.88%

28.21%

0


27.27%

44

39


35.85%

45.16%

Q1 2009

Other private M&A

48.72%

36.23%

Q1 2010

Q1 2007

Merger

32.08%

1.89%

Q1 2011

Q1 2008

Joint venture

45.45%

Q1 2013

Q1 2012

Divestment

100 150

100

150

120

90

60

30

0


34


Sector analysis: Infrastructure & utilities Buoyant deal activity drives optimism for 2013 Q1 in 2013 saw a significant uptick on the same period in 2012 in terms of both deal volume and deal value. In fact, globally Q1 was the most buoyant quarter in the infrastructure sector since Q2 2012.

––Airports M&A in 2013 got off to a good start in the UK, with Manchester Airports Group closing their GBP1.5bn acquisition of Stansted Airport from Heathrow Holdings Limited (formerly known as BAA). This is the third airport that the UK’s Competition Commission has ordered Heathrow to sell (following Gatwick and Edinburgh). We expect to see a continuation of significant activity in the global airports sector as organisations such as Abertis and Hochtief look to dispose of their airport interests in the UK, Europe and the Americas, and various privatisation programmes are progressed. For example, in Portugal VINCI bought out ANA, bidding EUR3.08bn for a 50-year concession agreement to run Portugal’s ten airports. The Chicago Midway privatisation in the U.S. is ongoing, with a number of bidders interested in operating the airport. More generally, we expect to see increased privatisation activity globally over the coming months. ––Energy utilities was an active sector over the quarter, with Kinder Morgan Energy Partners acquiring El Paso Corporation for USD1.65bn and E.ON signing an agreement with Czech energy company


Energetický a Průmyslový Holding (EPH) for the sale of its indirectly held 24.5% interest in Slovakian energy company Energetický Plynárenský Priemysel for EUR1.3bn. Again, this is a sector that we expect to continue to be active during 2013. The auction process for Net4Gas in the Czech Republic reached a conclusion with a joint venture between Borealis and Allianz acquiring the asset. It has also been reported in industry press that state-controlled Finnish utility Fortum and Phoenix Gas in Northern Ireland are potentially coming to market in 2013. ––A major story over the quarter was the collapse of the USD5.7bn privatisation of Turkey’s toll roads after the government took the view that the five bids received did not match their price expectations. It remains to be seen whether the process can be resurrected. Roads M&A has been relatively quiet in comparison with Q4 2012 when Abertis and Brookfied acquired a controlling 60% stake in the listed Brazilian toll road network operator OHL for EUR2.5bn.

––In Australia, bids are in for the privatisation by the NSW Government of two ports in NSW – Port Botany and Port Kembla – reported to be valued together at up to AUD3bn. The long-term growth prospects of these ports have attracted interest from a number of infrastructure investors. ––Overall, the outlook for M&A activity in the rest of 2013 is positive, although some commentators have expressed concern about the volume of funds chasing the assets coming to market. 2012 saw USD25bn raised by infrastructure funds – a 10% increase on 2011. This included the largest ever infrastructure fund to close - Global Infrastructure Partners II at USD8.25bn – as well as significant capital raisings by Highstar, Carlyle, EQT and Meridiam.

35

Total

197%

9


50%

deals in Q1 2013

increase in volume of deals compared to Q1 2012

infrastructure & utilities DEAL TYPES: Q1 2007-2013 Divestment

11.11%

15.79%

12

20

5

60

15

5

75

80

100 20

100

20

0


15

25

10 Deal number

10

0

40

16

18.75%

0

6

58.33%

37.50%

0

15

43.75%

41.67%

Q1 2007

16.67%

50%

Q1 2008

19

20%

53.33%

Q1 2009

16.67%

36.84%

Q1 2010

6

26.67%

66.67%

Q1 2011

9

50%

88.89%

Q1 2012


47.37%

Q1 2013

Other private M&A


36


Sector analysis: Life sciences A minnow of a quarter Our statistics identify only 17 deals in the sector globally in Q1 of 2013, with only Q2 2009 offering a worse showing in recent years.

––The largest deal in the sector this quarter was the move by Biogen Idec to buy assets relating to Tysabri (a multiple sclerosis drug) from Irish drug-maker Elan Corporation. The agreement was announced in February and concluded in April. Elan has received USD3.25bn in cash and will receive tiered royalty payments, on all indications, for the life of the complete Tysabri asset. For the first twelve months, Elan will receive 12% royalties on in-market sales of Tysabri, and thereafter, 18% royalties on in-market sales up to USD2bn and 25% royalties on in-market sales exceeding USD2bn. Elan went on to announce a cash dividend policy directly linked to the transaction. Under the new policy, the uncapped dividend programme will be directly linked to Tysabri market performance calculated as a percentage of the Tysabri royalty paid to Elan from Biogen Idec. Following the Biogen Idec deal, Elan has also said it will offer a one-off USD1bn share buyback, refinance debt and seek future acquisitions. Elan has refocused its business considerably in recent years, spinning off its drug-discovery business, Prothena, and selling its Athlone-based drug technologies manufacturing business. It rebuffed a takeover offer from Royalty Pharma in March.


––The injectables market saw the second-biggest deal this quarter. In February, Mylan said it would buy Agila Specialties from India’s Strides Arcolab for USD1.6bn. Agila is headquartered in Bangalore and has nine manufacturing facilities in locations including India, Brazil and Poland. Agila’s manufacturing capabilities include vials, pre-filled syringes, ampoules, lyophilization, cytotoxics, and antibiotics. While the injectables market has been a troubled one, facing both product shortages and manufacturing difficulties in recent years, it has seen a number of acquisitions. Generics companies in particular have viewed injectables as a route to higher margin opportunities. Companies like Mylan are focusing on high-quality manufacturing (critically, eight of Agila’s manufacturing facilities have been approved by the FDA) and other “value adds”, such as pre-measured doses, to command higher prices. Branded pharma companies have also shown an interest in the space (Pfizer was also said to be looking at Agila) as they pursue opportunities in branded generics to help them penetrate emerging markets, in particular.

––In the retail sector there was other news to get pharma companies thinking about their strategies. Walgreens and Alliance Boots announced a strategic, long-term relationship with AmerisourceBergen to collaborate on global supply chain opportunities. The deal also gave Walgreens and Alliance Boots rights to acquire minority equity position in AmerisourceBergen. The collaboration follows the Walgreens and Alliance Boots strategic partnership announced in June 2012 and adds significant value to it. The scale of the deal will give Walgreens and Alliance Boots additional purchasing power and will also enable the companies to move their supply chain closer to a more efficient “just-in-time” model. It may force Amerisource’s rivals (such as Cardinal Health, who will lose Walgreens’ business as a consequence of the transaction) to seek similar partnerships. It remains to be seen if the deal will also have an impact on the way pharma companies view distribution, perhaps encouraging them to favour “direct-to-pharmacy” schemes.

37

Total

43%

17

decrease in value of deals compared to Q1 2012

57%

deals in Q1 2013


LIFE SCIENCES DEAL TYPES: Q1 2007-2013 Divestment

11.76% 2.94% 4.55% 5.41%

Deal number

60

52

80

40


5.77%

25

40

3.85%

0

20

25%

20

0

2.56%

23.08% 25% 27.27% 27.03%

37

38.46%

30.77%

0

52

29.41%

9.09%

22

51.35%

16.22%

Q1 2007

29.41%

27.27%

Q1 2008

39

34 31.82%

20.59%

Q1 2009

43.59%

23.08%

Q1 2010

29.41%

30.77%

Q1 2011

17

Take private


47.06%

29.41%

Q1 2012


48.08%

Q1 2013

Other private M&A

100 60

75

100

60

50

40

30

20

10

0


38


Sector analysis: Private equity Deal activity remains sparse, against an uncertain backdrop Another quiet quarter for private equity investors, with fewer deals and the value of transactions only lifted by two megadeals. But activity could pick up as the year progresses.

––Deal activity fell again in Q1 2013, with the lowest number of PE deals in a quarter since Q2 2008. The number of deals was down by 38% compared to Q1 2012, and down by 43% compared to Q4 2012. Deal values were also down by 35% compared to Q4 2012.

––Activity fell in almost every region, except for China and Asia Pacific, where there was a nominal increase in the number of deals compared to Q1 2012 and Q4 2012. In the U.S. and Western Europe, deal activity fell by approximately 50% compared to Q4 2012.

––Although deal values were up by 10% compared to Q1 2012, these were inflated by two megadeals, namely the bid for Heinz by Berkshire Hathaway and the bid for Dell by a Michael Dell-led consortium that includes Silver Lake Partners. These deals are unlikely to mark the return of mega buy-outs and have a number of unique characteristics, not least the involvement of Warren Buffett and Michael Dell, respectively.

––Nevertheless, Germany saw a number of important PE deals in the quarter, including Bertelsmann’s EUR800m purchase of the remaining 51% of BMG and KKR and Permira’s sale of shares in ProSeibenSat.1 to institutional investors.

––The Dell deal does point to something of a new trend, attracting as it has in the “go-shop” period a number of potential competing offers, including one from another PE house, Blackstone. This marks a break with tradition, where rival houses have avoided doing direct battle over an asset. But whether it points to a new, post-crisis, trend remains to be seen.


––The PE market, as with the wider M&A market, continues to be affected by uncertainty over the global macroeconomic environment. Anecdotally, it appears that there is a limited pipeline of good-quality assets coming up for sale, so it is possible that the market will remain subdued in the short term. ––However, it is not all bleak. PE players are clearly on the lookout for the right deals at the right price. U.S. houses are said to be active and increasingly “aggressive” in parts of Europe right now, making their presence felt in auctions.

––Secondary deals could also increasingly get done this year as funds reach the debt maturity wall on key acquisitions and look to make exits at the best price possible. ––We also expect to see Chinese private equity players continue to do outbound deals, a trend started last year and likely to grow in 2013. As the flow of capital out of China continues to rise, it is likely that PE will play its part in China’s growing appetite for overseas transactions.

39

Total

10%

96


38%

deals in Q1 2013


private equity DEAL TYPES: Q1 2007-2013 Total buyouts

Secondary buyouts

Trade exits

96

36.79%

58

0

20

0

0

100

25

40

Deal number

31.64%

17.97%

50.39%

Q1 2007

203

32.02%

14.29%

53.69%

Q1 2008

25.86%

8.62%

65.52%

Q1 2009

16.04%

106

47.17%

Q1 2010

174

37.93%

10.92%

51.15%

Q1 2011

42.86%

154

11.04%

46.10%

Q1 2012

44.79%

13.54%

41.67%

Q1 2013

60

256

80

200


100 300

75

100

300

250

200

150

100

50

0


40


Sector analysis: Telecoms, media and technology A huge start to the year – but will it last? Thanks largely to the Dell, Liberty Global and Comcast transactions, TMT has had its best first quarter by value since 2007. We wish we could cite these deals as evidence of a return of the megadeal, but, sadly, we fear this is not the case.

––The largest TMT deal this quarter is the proposed USD22bn acquisition by Liberty Global of Virgin Media, the company created by the merger of NTL, Telewest and Virgin Mobile. The acquisition sees Liberty make a strong move into the UK market – on completion, the new company will be the second-biggest pay-TV business, after BSkyB. Less than a month later, BSkyB was in the market itself, snapping up Telefónica UK’s broadband business for GBP180m. BSkyB has said this purchase will make it the second-largest provider in the UK broadband market. ––Aside from being the second-largest deal this quarter at just under USD22bn, Dell is also making headlines for being one of the most controversial. Press reports suggest that, in addition to Michael Dell and Silver Lake’s offer, Blackstone, Hewlett-Packard and Lenovo are also circling, and shareholders including Carl Icahn, T. Rowe Price and Southeastern Asset Management have been voicing loud opposition to the take private. However, large though it is, the possible LBO is probably most instructive for what it tells us about the PC market – that with the inexorable rise of the tablet, PC sales continue to decline and many see the future for Dell as a business services company.


Michael Dell thinks that this transformation – from hardware ugly duckling to services swan – will be best achieved as a private company, away from the spotlight of the public markets. ––Rounding off a trio of large deals in the sector (though very much the younger sibling at only USD16bn) is the acquisition by Comcast of GE’s stake in NBCUniversal. Aside from their size, the common factor of all the large deals this quarter is that they are in the cable sector, a market that has already seen much consolidation in the last decade. Cable looks attractive right now, particularly when compared to its telecoms cousins, because for the most part, cable companies are not facing the same investment challenges besetting the telecoms industry. In addition, consolidation is being driven by the promise of the added subscriber “stickiness” that triple- or in some cases quadruple-play companies derive from their offerings. ––Another interesting deal this quarter was the acquisition by Comcast of a 7.84% stake in Arris Group. Arris is a global communications technology company specialising in integrated broadband network solutions. Arris significantly boosted its position in the set-top box

market last December when it announced its acquisition of Motorola Mobility’s cable home business from Google. Arris is one of several companies in this subsector involved in M&A activity – for example, Cisco bought NDS last year and Ericsson is rumoured to be interested in Microsoft’s IPTV business, Mediaroom. We expect more jostling for position in the TV market as the year unfolds. The way we watch television is changing and the range of devices we use to access TV content is expanding. We expect more consolidation as the market for IP-connected home environments becomes more established. ––Finally, the network control space continues to see dealmaking. This activity reflects competition by the big tech players for the IT stacks of the communications providers. As smart devices, mobile apps and connected services have become increasingly ubiquitous, technologies to manage the exponential increase in network signalling and data traffic have grown in importance. This quarter, Oracle acquired Tekelec (a CDN, providing network signalling, policy control, and subscriber data management solutions for communications networks) and also Acme Packet.

41

Total

113%

58


24%

deals in Q1 2013


TELECOMS, MEDIA AND TECHNOLOGY DEAL TYPES: Q1 2007-2013 Demerger

Merger

Take private


58

1.59%

21.21%

39.39%

3.03%

18.56%

Deal number

60

107

80

80


2.80%

25

40

30.84%

0

40

97 29.91%

1.87%

34.58%

20

0

4.82%

28.57%

34.92%

63

47.42%

32.99%

1.03%

0

2.63%

14.47%

18.07%

49.40%

83

33

3.45%

15.52%

48.28%

55.26%

33.33%

3.03%

Q1 2007

Other private M&A

76

33.33%

1.59%

Q1 2009

1.20% 1.20%

22.89%

2.41%

Q1 2011

1.32%

26.32%

Q1 2012

Q1 2008

Joint venture

32.76%

Q1 2013

Q1 2010

Divestment

100 120

75

100

120

100

80

60

40

20

0


42


Top ten global outbound acquirers Q1 2013

37

U.S. USD44,123m

12

Hong Kong USD5,156m

9

China USD9,537m

9

Canada USD5,969m

7

Japan USD4,280m

7

South Korea USD3,065m

5

5

Netherlands USD9,185m

France USD1,200m

5

UK USD2,575m

5

Switzerland USD2,396m

The U.S. is the world’s largest outbound acquirer – it also has the largest “net score” of +13 deals in Q1 2013 (Hong Kong has the second-largest net score of +6): countries can be assigned a “net score” based on the volume of outbound (+) versus inbound (-) M&A.


43

Definitions Divestment

Insolvency-related

A disposal where the seller is a corporate selling a controlling interest (>30%) in one or more of its businesses. This excludes private equity exits and disposals made by high net worth private individuals and families. Includes government-related sales and disposals made by non-private equity financial investors, such as investment holding companies.

A transaction where a company has filed for bankruptcy or is subject to another insolvency process or procedure, and sells off part or all of its assets to generate the cash necessary to pay creditors.

Joint venture

A transaction that is conducted across national boundaries. The deal involves parties from at least two different countries.

A transaction that involves the pooling of assets between different companies, whereby the ownership of the new joint venture is shared between the parent companies involved. Does not include so-called joint ventures where a company’s sole contribution is cash rather than assets.

Demerger

Merger

Cross-border

A transaction where a company spins off one of its subsidiaries, resulting in the creation of a separate listed business independent from the activities or influence of the former parent. The shareholders ultimately hold shares in each company and neither the former parent company nor shareholders receive any cash as a result of the deal (as opposed to a flotation/IPO).

Domestic A transaction conducted within a national boundary. The deal involves parties that are incumbent nationals of that country.

A transaction that involves the combination of two or more separate businesses into one, with broadly equal holding and governance rights assigned to the respective shareholders of each company.

Other private M&A Acquisitions or disposals not covered by the other classifications. Includes PE exits and disposals made by high net worth individuals and families.

Public recommended acquisition (excl PE-related take privates) A friendly acquisition where the parties involved reach agreement over the terms of the deal, normally prior to the acquisition being formally announced. The transaction requires approval from either the bidder, target or vendor shareholders in a public forum.

Public hostile acquisition (excl PE-related take privates) An acquisition of a publicly-quoted target where the target management does not recommend the offer within two weeks.

Take privates (hostile and recommended) An acquisition of a publicly-quoted company by financial investors such as private equity houses or venture capital firms (as opposed to a trade buyer). The target company is subsequently delisted.


44


About the research The underlying data to this research comes from Remark’s sister product, Mergermarket. Both products are part of the Pearson-owned Mergermarket Group. Remark, the publishing, market research and events division of The Mergermarket Group, offers a range of services that give clients the opportunity to enhance their brand profile, and to develop new business opportunities. Remark publishes over 50 thought leadership reports and holds over 70 events across the globe each year which enable its clients to demonstrate their expertise and underline their credentials in a given market, sector or product.


Remark is part of The Mergermarket Group, a division of the Financial Times Group. To find out more please visit www.mergermarket.com/remark/ or www.mergermarket.com/events/ – This report only includes deals worth USD100m and over. – The data contained in 2013 results spans 1 January 2013 to 18 March 2013 inclusive.

45

In this brochure Allen & Overy means Allen & Overy LLP and/or its affiliated undertakings. The term partner is used to refer to a member of Allen & Overy LLP or an employee or consultant with equivalent standing and qualifications or an individual with equivalent status in one of Allen & Overy LLP’s affiliated undertakings. Allen & Overy maintains a database of business contact details in order to develop and improve its services to its clients. The information is not traded with any external bodies or organisations. If any of your details are incorrect or you no longer wish to receive marketing materials from Allen & Overy, please email [email protected].


46



47


GLOBAL PRESENCE

Allen & Overy is an international legal practice with approximately 5,000 people, including some 512 partners, working in 42 offices worldwide. Allen & Overy LLP or an affiliated undertaking has an office in each of: Abu Dhabi Amsterdam Antwerp Athens (representative office) Bangkok Beijing Belfast Bratislava Brussels Bucharest (associated office) Budapest Casablanca Doha Dubai

Düsseldorf Frankfurt Hamburg Hanoi Ho Chi Minh City Hong Kong Istanbul Jakarta (associated office) London Luxembourg Madrid Mannheim Milan Moscow

Munich New York Paris Perth Prague Riyadh (associated office) Rome São Paulo Shanghai Singapore Sydney Tokyo Warsaw Washington, D.C.

Allen & Overy means Allen & Overy LLP and/or its affiliated undertakings. The term partner is used to refer to a member of Allen & Overy LLP or an employee or consultant with equivalent standing and qualifications or an individual with equivalent status in one of Allen & Overy LLP’s affiliated undertakings. © Allen & Overy LLP 2013 CS1303_CDD-35617 UK

www.allenovery.com