Economy & Finance

Merger Tracker Monthly March2009.2

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1. MERGER TRACKER M&A Market Monthly Overview of Global Analysis Middle-Market M&A Activity March 2009 Steven M. Bernard, CFA Director of M&A Market Analysis…
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  • 1. MERGER TRACKER M&A Market Monthly Overview of Global Analysis Middle-Market M&A Activity March 2009 Steven M. Bernard, CFA Director of M&A Market Analysis sbernard@williamblair.com 312.364.8221
  • 2. Table of Contents Commentary 1 Global Activity 3 Regional Transactions 3 Middle-Market Regional Transactions 4 U.S. M&A Activity 5 Annual Transactions 5 Transaction Detail 6 Valuation Multiples 7 Private-Equity Transactions 8 Transaction Detail 9 Sector Breakdown 10 Cross-Border Transactions 11 U.S. Financing Markets 13 Debt Capital Markets 13 Equity Capital Markets 14 European M&A Activity 15 Transaction Detail 15 Annual Transactions 16 Valuation Multiples 17 Private-Equity Transactions 18 Emerging Markets M&A Activity 19 Select William Blair & Company Transactions 20 William Blair & Company Corporate Finance Contact List 23 Notes 24 Disclosures 25
  • 3. Commentary Commentary OVERVIEW Two months into 2009, global M&A activity remains anemic and prospects for any meaningful near-term bounce appear remote. This weakness is affecting all global regions and industry sectors as well as strategic and financial buyer regardless of deal size. While there has been the occasional multibillion-dollar transaction, the majority of activity remains in the small sub-$50 million category. We expect this pattern to remain the norm and believe that the near-term outlook remains negative. The continued weakness in the equity markets has made it difficult to finance transactions with equity, while the credit markets remain mostly closed, limiting access to debt financing. Furthermore, the uncertainty regarding the economic outlook has forced most corporate CEOs to focus inward on their own financial performance rather than assessing acquisition opportunities. GLOBAL M&A HIGHLIGHTS February M&A activity was down significantly across all geographic regions. The total number of global transactions for the month was 2,125, representing a 37.9% decline compared with last year while the total dollar volume declined 52.8%, to just $97.2 billion. Both North America and Europe saw declines of more than 30% in the number of transactions. The dollar volume declined in excess of 35% for all regions, with an 80% decline in Latin America. Results for middle-market activity were also extremely weak. The global number of deals for the month totaled 1,139, a decline of 37.1%, while the dollar volume of disclosed transactions was $41.0 billion, a decline of 63.8%. U.S. M&A HIGHLIGHTS U.S. M&A activity remains on a downward spiral, reflecting the weak economic environment, declining stock prices, and near shut-down of the credit markets, which have been weighing on the market for more than a year. Overall, U.S. M&A activity in February totaled just 584 announced deals, down 36.0% from last year and 32.0% below the trailing-12-month monthly average of 859. This transaction total was the lowest monthly total since mid-2003. The dollar volume of transactions totaled just $34.1 billion, a 52.2% decrease from the corresponding period last year and significantly below the depressed trailing-12-month monthly average of $94.5 billion. In the middle market, the number of transactions totaled 234, a decline of 43.5% from the year-ago period, while the dollar volume of middle-market transactions declined 70.9%. The best-performing segment continues to be the lower end of the middle market, where the number of transactions under $50 million declined by less than 20% in February. However, the dollar volume of these transactions declined more than 35%, indicating that even this segment was experiencing a decline in transaction size. The U.S. private-equity market remains under significant pressure. For the month, there were just 47 private- equity transactions, representing a year-over-year decline of 73.6%, while the total dollar volume declined 18.2%. As a result of this weakness, middle-market transactions involving acquisitions by private-equity firms declined to 11.3% of all deals, down from 11.4% at the end of 2008 and 15.2% in 2007. Overall EBITDA multiples continue to decline, reflecting the slowdown in the economy and reduced competition between strategic buyers and private-equity firms. For the LTM, the overall valuation multiple for all transactions was 9.9x EBITDA, compared with 11.0x EBITDA during 2008 Public companies remain the most active middle-market acquirers, representing 33.2% of all transactions, although private-company acquirers and foreign acquirers have both continued to significantly increase their share of the total compared with recent totals. For middle-market transactions and those with an undisclosed dollar value, the most actively targeted industries by foreign buyers were computers/electronics and healthcare. Companies from Canada and the United Kingdom were the most active buyers of U.S. middle-market companies. 1
  • 4. Commentary (cont'd) Commentary (cont'd) EUROPEAN M&A HIGHLIGHTS European M&A activity also remains extremely weak. In February, there were 781 announced transactions involving European companies. This total represented a decline of 44.5% compared with the corresponding period last year. The total dollar volume of $46.1 billion was more than 60% below the trailing-12-month monthly average of $103.9 billion. European middle-market activity was also very weak, with the number of deals down 53.6%, while the dollar volume declined 73.3% compared with the corresponding period last year. European private equity was also down significantly as the number of transactions was just 56, down 66.5% from the corresponding period last year. For middle-market deals over the past 12 months, the EBITDA multiple continues to decline and is currently 8.7x EBITDA, compared with 9.5x for 2008. The EBITDA multiple for all European transactions also continues to decline, coming in at 9.4x for the LTM, ending at 9.4 in February, down from 10.2x at the end of 2008 and 11.5x for 2007. Global M&A Activity Number of Deals Deal Value Undisclosed Middle Market >$750M Deal Value ($ in billions) 40,689 45,000 $4,500 40,550 35,997 40,000 $4,000 35,000 $3,500 30,721 30,792 30,000 $3,000 26,573 27,251 25,811 24,880 22,864 22,758 25,000 $2,500 20,000 $2,000 15,000 $1,500 6,980 10,000 $1,000 4,659 5,000 $500 0 $0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2/08 2/09 YTD YTD Number of Deals >$750M 404 563 646 340 296 292 439 580 799 1,032 625 118 47 Middle Market 11,853 12,923 15,870 12,998 12,412 11,932 13,745 16,742 18,756 21,468 21,131 3,611 2,369 Undisclosed 10,607 13,765 14,205 13,235 12,172 10,534 11,627 13,470 16,442 18,189 16,973 3,251 2,243 $2,224 $3,059 $3,031 $1,575 $1,242 $1,355 $1,943 $2,751 $3,648 $4,275 $2,781 $429 $290 Deal Value Source: Dealogic and William Blair & Company, L.L.C. Mergers and Acquisitions market analysis. 2
  • 5. Global Activity Regional Transactions Global Activity The pace of global M&A activity continues to decline substantially from prior-year levels. No region has been spared, with significant double-digit declines in both the number of deals and dollar volume experienced across all major geographic regions. The one exception is North America, which has a modest year-to-date increase in dollar volume due to the impact of the Pfizer/Wyeth transaction. Without the impact of that transaction, it would also show a sizable double-digit decline. Global M&A Activity Detail NUMBER OF DEALS DEAL VALUE % Change % Change 2009 '09 vs. '08 2009 '09 vs. '08 2007 2008 2007 2008 FEBRUARY North America 874 923 574 (37.8%) $178,054 $52,243 $33,024 (36.8% ) Latin America 78 73 38 (47.9%) $4,517 $5,400 $1,050 (80.6% ) Europe 952 1,250 685 (45.2%) $93,340 $95,162 $37,196 (60.9% ) Africa / Middle East 44 74 42 (43.2%) $8,730 $7,637 $2,189 (71.3% ) Asia Pacific 832 1,102 786 (28.7%) $49,897 $45,661 $23,726 (48.0% ) TOTAL 2,780 3,422 2,125 (37.9%) $334,539 $206,103 $97,185 (52.8%) YTD North America 1,889 1,986 1,347 (32.2%) $271,346 $122,973 $147,044 19.6% Latin America 154 167 85 (49.1%) $7,664 $15,680 $9,407 (40.0% ) Europe 1,847 2,410 1,567 (35.0%) $171,576 $181,029 $81,185 (55.2% ) Africa / Middle East 110 151 98 (35.1%) $12,279 $13,352 $5,362 (59.8% ) Asia Pacific 1,691 2,254 1,558 (30.9%) $75,572 $95,927 $47,019 (51.0% ) TOTAL 5,691 6,968 4,655 (33.2%) $538,436 $428,962 $290,016 (32.4%) LTM North America 11,323 12,403 9,894 (20.2%) $1,650,180 $1,468,400 $1,015,826 (30.8% ) Latin America 866 1,218 975 (20.0%) $79,540 $101,438 $103,749 2.3% Europe 11,672 13,146 11,469 (12.8%) $1,370,444 $1,799,546 $945,464 (47.5% ) Africa / Middle East 646 798 870 9.0% $73,474 $108,219 $46,240 (57.3% ) Asia Pacific 11,470 14,361 13,142 (8.5%) $552,040 $687,970 $530,798 (22.8% ) TOTAL 35,977 41,926 36,350 (13.3%) $3,725,677 $4,165,572 $2,642,076 (36.6%) Source: Dealogic and William Blair & Company, L.L.C. Mergers and Acquisitions market analysis. 3
  • 6. Global Activity (cont'd) Middle-Market Regional Transactions Global Activity (cont'd) Global middle-market activity was also down in February, with all regions showing significant declines (more than 50% in most cases) in dollar volume. In aggregate, the total deal value was down 63.8% compared with the year-ago period. The number of transactions also declined dramatically for the month, down 37.1% from the year-ago period, with North America down 35% and Europe declining 56.1%. Two months into the new year, all the regions remain solidly down for the year. Overall, the total number of transactions has declined 34.4%, ranging from North America down 24.3% to Latin America down 60.2%. The dollar volume year-to-date is also down significantly, with an overall decline of 58.7%. The Asia-Pacific region had the smallest decline, at 43.6% while Europe declined 72.3%, the largest of all regions. Global Middle-Market M&A Activity Detail NUMBER OF DEALS DEAL VALUE % Change % Change 2009 '09 vs. '08 2009 '09 vs. '08 2007 2008 2007 2008 FEBRUARY North America 253 381 247 (35.2%) $27,300 $27,799 $10,568 (62.0% ) Latin America 38 44 20 (54.5%) $4,517 $3,050 $1,050 (65.6% ) Europe 398 553 243 (56.1%) $35,392 $47,472 $10,587 (77.7% ) Africa / Middle East 30 39 25 (35.9%) $3,813 $4,036 $1,262 (68.7% ) Asia Pacific 608 793 604 (23.8%) $25,667 $30,917 $17,539 (43.3% ) TOTAL 1,327 1,810 1,139 (37.1%) $96,688 $113,274 $41,007 (63.8%) YTD North America 492 758 574 (24.3%) $58,076 $53,595 $23,179 (56.8% ) Latin America 74 93 37 (60.2%) $7,664 $5,534 $2,419 (56.3% ) Europe 766 1,015 535 (47.3%) $63,004 $84,342 $23,385 (72.3% ) Africa / Middle East 69 79 55 (30.4%) $7,361 $6,291 $3,539 (43.7% ) Asia Pacific 1,260 1,665 1,168 (29.8%) $49,156 $62,096 $35,024 (43.6% ) TOTAL 2,661 3,610 2,369 (34.4%) $185,260 $211,857 $87,546 (58.7%) LTM North America 3,922 4,399 4,384 (0.3%) $361,205 $378,572 $261,947 (30.8% ) Latin America 425 662 489 (26.1%) $41,272 $53,733 $34,045 (36.6% ) Europe 5,269 5,781 4,655 (19.5%) $429,788 $517,764 $335,893 (35.1% ) Africa / Middle East 379 500 479 (4.2%) $34,621 $42,546 $31,950 (24.9% ) Asia Pacific 8,587 11,073 9,882 (10.8%) $294,756 $406,610 $314,232 (22.7% ) TOTAL 18,582 22,415 19,889 (11.3%) $1,161,643 $1,399,225 $978,066 (30.1%) Source: Dealogic and William Blair & Company, L.L.C. Mergers and Acquisitions market analysis. 4
  • 7. U.S. M&A Activity Annual Transactions U.S. M&A Activity Total announced U.S. M&A activity in February was just 584 transactions, down 36.0% from last year and 32.0% below the trailing-12-month monthly average of 859. This transaction total was the lowest monthly total since mid-2003. The dollar volume of transactions totaled just $34.1 billion, a 52.2% decrease from the corresponding period last year and significantly below the depressed trailing-12-month monthly average of $94.5 billion. Middle-market activity was equally weak this month, with the number of deals down 43.5% and the dollar volume down a staggering 70.9%. The best-performing segment continues to be the lower end of the middle market, where the number of transactions under $50 million declined by less than 20% in February. However, the dollar volume of these transactions declined more than 35%, indicating that even this segment was experiencing a decline in transaction size. Year-to-date, the U.S. dollar volume has declined just 6.0%, which reflects the impact of the Pfizer/Wyeth transaction rather than a pickup in activity. U.S. M&A Activity Detail NUMBER OF DEALS DEAL VALUE % Chg. % Chg. 2009 '09 vs. '08 '09 vs. '08 2007 2008 2007 2008 2009 FEBRUARY < $50M 163 223 180 (19.3%) $3,105 $3,470 $2,244 (35.3% ) $50M-$250M 100 138 43 (68.8%) $11,579 $15,875 $4,962 (68.7% ) $250M-$750M 47 53 11 (79.2%) $19,906 $22,104 $4,869 (78.0% ) (43.5%) Total Middle-Market 310 414 234 $34,590 $41,449 $12,075 (70.9%) Monthly Average 361 386 364 (5.6%) $35,498 $38,801 $26,232 (32.4% ) > 750M 42 18 8 (55.6%) $145,277 $29,770 $21,988 (26.1% ) – – – – Undisclosed 601 481 342 (28.9%) Total Deals 953 913 584 (36.0%) $179,867 $71,219 $34,063 (52.2%) Monthly Average 1,019 1,075 859 (20.2%) $145,767 $135,754 $94,452 (30.4% ) YTD < $50M 310 485 442 (8.9%) $5,593 $7,520 $5,363 (28.7% ) $50M-$250M 195 252 96 (61.9%) $23,292 $28,720 $10,350 (64.0% ) $250M-$750M 96 95 24 (74.7%) $40,959 $38,154 $10,071 (73.6% ) Total Middle-Market 601 832 562 (32.5%) $69,844 $74,393 $25,785 (65.3%) > 750M 76 49 20 (59.2%) $214,340 $86,709 $125,649 44.9% – – – – Undisclosed 1,232 1,050 811 (22.8%) Total Deals 1,909 1,931 1,393 (27.9%) $284,184 $161,102 $151,434 (6.0%) LTM < $50M 2,503 2,635 2,968 12.6% $43,016 $42,123 $41,937 (0.4% ) $50M-$250M 1,288 1,372 1,036 (24.5%) $149,935 $157,736 $116,272 (26.3% ) $250M-$750M 544 624 366 (41.3%) $233,024 $265,750 $156,569 (41.1% ) Total Middle-Market 4,335 4,631 4,370 (5.6%) $425,975 $465,609 $314,778 (32.4%) > 750M 392 438 219 (50.0%) $1,323,225 $1,163,443 $818,645 (29.6% ) – – – – Undisclosed 7,499 7,835 5,714 (27.1%) Total Deals 12,226 12,904 10,303 (20.2%) $1,749,201 $1,629,053 $1,133,423 (30.4%) Source: Dealogic and William Blair & Company, L.L.C. Mergers and Acquisitions market analysis. 5
  • 8. U.S. M&A Activity (cont'd) Transaction Detail U.S. M&A Activity (cont'd) U.S. M&A Activity Number of Deals Deal Value Undisclosed Middle Market > $750M Deal Value ($ in billions) 13,308 15,000 $2,400 12,882 12,817 12,411 12,268 10,841 10,385 $1,800 9,910 10,072 10,000 8,928 8,749 $1,200 5,000 $600 1,931 1,393 0 $0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2/08 2/09 Number YTD YTD of Deals >$750M 264 252 327 191 129 144 231 282 363 465 248 49 20 Middle Market 6,397 5,337 6,772 4,613 4,007 4,215 4,499 4,442 4,484 4,400 4,640 832 562 Undisclosed 6,647 7,228 5,169 5,268 4,613 4,569 5,180 5,661 7,564 8,017 5,953 1,050 811 $1,585 $1,717 $1,608 $875 $569 $683 $991 $1,302 $1,657 $1,752 $1,143 $161 $151 Deal Value Source: Dealogic and William Blair & Company, L.L.C. Mergers and Acquisitions market analysis. U.S. Middle-Market M&A Activity Number of Deals Deal Value < $50M $50-250M $250-750M Deal Value 6,772 ($ in billions) 6,397 7,000 $600 6,000 5,337 $500 4,613 4,640 4,499 5,000 4,442 4,484 4,400 4,215 $400 4,007 4,000 $300 3,000 $200 2,000 832 562 $100 1,000 0 $0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2/08 2/09 YTD YTD Number of Deals $250-750M 432 527 515 298 291 313 405 424 537 625 437 95 24 $50-250M 1,444 1,420 1,582 1,006 894 1,065 1,221 1,277 1,285 1,315 1,192 252 96 < $50M 4,521 3,390 4,675 3,309 2,822 2,837 2,873 2,741 2,662 2,460 3,011 485 442 $404 $439 $463 $280 $259 $291 $352 $365 $420 $461 $363 $74 $26 Deal Value Source: Dealogic and William Blair & Company, L.L.C. Mergers and Acquisitions market analysis. 6
  • 9. U.S. M&A Activity (cont'd) Valuation Multiples U.S. M&A Activity (cont'd) Overall EBITDA multiples continue to decline, reflecting the slowdown in the economy and reduced competition between strategic buyers and private-equity firms. However, multiples have not fallen as much as one might expect, given the decreased availability of quality companies for sale. The data are also slightly skewed by the heavy reliance on public-company transactions, which tend to have a higher valuation than private-company transactions. One-week and four-week acquisition premiums for public companies continue to creep upward as buyers continue to see attractive valuations despite sharply lower stock prices. U.S. EV/EBITDA Valuation Multiples 12.0x Middle Market Overall Market 10.0x 8.0x 6.0x 4.0x 2.0x 0.0x 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 LTM Middle Market 9.8x 8.5x 7.5x 8.1x 9.2x 8.0x 9.1x 11.2x 12.1x 9.9x 9.2x 8.6x Overall Market 10.4x 9.1x 8.1x 8.5x 9.3x 8.5x 9.5x 11.2x 12.0x 12.4x 11.0x 9.9x Source: Dealogic and William Blair & Company, L.L.C. Mergers and Acquisitions market analysis. U.S. EV/EBITDA Middle-Market Valuation Multiples < $50M $50M-$250M $250M-$750M 12.0x 10.0x 8.0x 6.0x 4.0x 2.0x 0.0x 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 LTM < $50M 8.2x 7.9x 7.1x 6.6x 9.5x 8.3x 8.8x 8.9x 11.8x 9.2x 6.7x 5.8x $50M-$250M 10.7x 9.2x 7.4x 8.6x 8.5x 7.3x 9.2x 11.7x 12.0x 11.4x 10.0x 10.0x $250M-$750M 11.3x 8.9x 8.2x 8.4x 9.6x 9.3x 9.3x 11.2x 12.2x 9.8x 12.5x 11.4x Source: Dealogic and William Blair & Company, L.L.C. Mergers and Acquisitions market analysis. Median Acquisition Premiums 1-W eek Premium 4-Week Premium 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 LTM Premium 1-Week 38.4% 39.2% 41.2% 47.3% 44.9% 35.3% 26.2% 32.3% 27.5% 29.3% 37.4% 41.3% 4-Week 42.3% 47.2% 49.0% 53.1% 47.3% 41.8% 29.6% 36.1% 30.3% 31.3% 41.0% 43.0% Source: Dealogic and William Blair & Company, L.L.C. Mergers and Acquisitions market analysis. 7
  • 10. U.S. M&A Activity (cont'd) Private-Equity Transactions U.S. M&A Activity (cont'd) Private-equity transaction activity continues to significantly lag the prior-year periods, especially for transactions over $750 million. For the month, there were just 47 private-equity transactions, representing a year-over-year decline of 73.6%, while the total dollar volume declined 18.2%. Year-to-date, the total number of transactions is down 53.2%, with each of the three size bands all registering a 50% or greater decline. U.S. Private-Equity Activity Detail NUMBER OF DEALS DEAL VALUE % Chg. % Chg. 2009 '09 vs. '08 '09 vs. '08 2007 2008 2007 2008 2009 FEBRUARY Middle-Market 57 85 24 (71.8%) $9,069 $13,382 $1,049 (92.2% ) Monthly Average 82 71 53 (26.1%) $10,648 $11,243 $5,681 (49.5% ) > 750M 18 2 1 (50.0%) $75,037 $3,183 $12,500 292.7% – – – – Undisclosed 101 91 22 (75.8%) Total Deals 176 178 47 (73.6%) $84,107 $16,565 $13,549 (18.2%) Monthly Average 184 183 120 (34.5%) $52,295 $47,227 $17,189 (63.6% ) YTD Middle-Market 115 159 77 (51.6%) $17,919 $20,168 $3,163 (84.3% ) > 750M 27 11 3 (72.7%) $95,141 $20,076 $27,700 38.0% – – – – Undisclosed 211 185 86 (53.5%) Total Deals 353 355 166 (53.2%) $113,060 $40,244 $30,863 (23.3%) LTM Middle-Market 978 855 632 (26.1%) $127,771 $134,920 $68,176 (49.5% ) > 750M 130 146 46 (68.5%) $499,773 $431,803 $138,094 (68.0% ) – – – – Undisclosed 1,103 1,198 762 (36.4%) Total Deals 2,211 2,199 1,440 (34.5%) $627,544 $566,723 $206,269 (63.6%) Source: Dealogic and William Blair & Company, L.L.C. Mergers and Acquisitions market analysis. U.S. Private-Equity Activity Deal Value Number of Deals Undisclosed Middle Market >$750M Deal Value ($ in billions) 2,242 2,500 $800 2,197 2,021 1,828 2,000 1,629 $600 1,358 1,500 1,221 1,071 1,012 1,010 $400 1,000 686 355 $200 166 500 0 $0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2/08 2/09 Number YT
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