European Companies More Averse To M&As in 2012 – Survey

By: EW News Desk Team   Date: 9 December 2011

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EconomyWatch, News Desk Team

 

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09 December 2011

European companies are less likely to engage in large merger and acquisition deals next year as compared to 2011, according to survey results published by UBS and Boston Consulting Group on Thursday.

 

The findings draw on the responses of 148 CEOs and senior managers from publicly listed companies in Europe. In its report, 46 percent of the respondents said that they would not, or were very unlikely to, pursue a firm with more than 500 million euros ($665.6 million) in sales – up from 41 percent last year.

45 percent added that the lack of any suitable target was the main barrier, while two in five executives said that high valuations of potential assets was a problem.

According to the report, while many European executives have been put off by the continued uncertainty in the region, there remained opportunities to do deals for those brave, or willing enough, to take the risk.

"When operations stabilise and the impact of macroeconomic developments is understood, it will be time to move from focusing on risks to look for opportunities. Investing in information will allow executives to act carefully but courageously while others remain paralysed,” said the report.

"It is likely that M&A deals in 2012 will have to be undertaken despite the low visibility of market conditions, company performance, and the impact of strategic moves, making sound analysis and execution all the more important."

According to Alexander Roos, a BCG partner and co-author of the report, "M&A activity next year will largely hinge on macroeconomic factors."

"If worries linger, 2012 could be very difficult for M&A. If they dissolve, it could be a strong year,” said Roos, as quoted byMarketWatch.

Though the percentage of survey respondents who were unlikely to engage in M&A activities have increased, the percentage of respondents who said they considered M&A the most effective use of cash next year remained steady at 28 percent.

"Industries haven't stopped evolving and the growth imperative hasn't dissolved. Beyond that stable core of one in six, there's a swath of companies needing to transact but not yet willing to take on plain-vanilla or more complex deals without a bigger price discount. This will be the case until market risk premiums and volatility subside. In the meantime, there is a healthy pipeline of restructurings," said Daniel Stillit, head of special situations research at UBS.

Related: Mergers and Acquisitions

Roos also pointed out that, "the strategic challenges facing many industries are so large that they cannot be met only through organic means.”

"M&A is increasingly needed if a company is to improve its competitive position fast enough. But good execution is also increasingly vital."    

 


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