Michael Benson, Managing Director, Stout Risius Ross (SRR) Dirk

Transcription

Michael Benson, Managing Director, Stout Risius Ross (SRR)
Dirk Liedtke, Managing Partner, Mummert & Company Corporate Finance GmbH
John Huang, Senior Partner, Dacheng
Sergio Michelsen Jaramillo, Partner, Brigard & Urrutia
Investment Opportunities
Around the World and
Stimulating Growth
Michael D. Benson
Managing Director
Stout Risius Ross, Inc.
Investment Banking
Valuation & Financial Opinions
Dispute Advisory & Forensic Services
Introduction of Panelists and Agenda
 Moderator: Mike Benson (Stout Risius Ross Advisors – North America)
 Panelists:
 Dirk Liedtke (Mummert & Company) – Europe & Germany
 Sergio Michelsen Jaramillo (Brigard & Urrutia) – South America – John Huang
(Dacheng) – Asia & China
 Agenda:
 Views From Around the World
 Current Health of Region
 Prospects for Inward and Outward Investment (Where people are investing) – Hotspots
(locations, sectors)
 Barriers
 View of Europe and Euro Crisis
GLOBAL M&A MARKET
UPDATE
Overview of Global M&A Activity
Historical Global M&A Volume and Value
14.0
13.1
11.6
12.0
9.9 10.0
10.0
10.8 10.21 0.51 0.5
11.6
11.911.8
10.9
10.3
10.410.4 10.2 10.5
8.1
$1,500
12.9
7.7 7.9 8.3
$1,250
$1,000
8.0
$750
6.0
$500
4.0
2.0
$
0.0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2007
2008
2009
Volume
Source: capitaliq.com
2010
2011
250
$0
'12
Value
4
M&A Outbound/Inbound Activity
M&A Outbound and Inbound Activity
Rank Country
1. United States of America
2. Japan
3. UK
4. China
5. Canada
6. France
7. Singapore
8. Germany
9. Sweden
10. Switzerland
11. Hong Kong
12. Netherlands
13. Brazil
14. Denmark
15. Russia
16. Australia
17. Taiwan
18. Norway
19. Luxembourg
20. United Arab Emirates
Volume of
Value of
Volume of
Value of
Outbound Deals Outbound Deals Inbound Deals Inbound Deals
84
$69,140
65
$62,663
42
34,563
7
2,856
40
20,598
43
41,486
24
20,279
13
5,317
23
16,965
28
23,764
17
17,849
11
7,961
13
4,990
NA
12
11,429
19
14,319
12
4,413
NA
10
24,551
6
1,484
8
3,004
7
4,974
8
2,258
6
9,270
6
7,442
16
7,477
6
2,476
7
3,889
5
4,805
NA
5
4,752
15
6,691
5
2,238
NA
5
1,663
7
5,287
5
1,623
NA
4
4,457
NA
Net Outbound/Inbound Activity
Net Outbound
19
Net Inbound
United States
35
Japan
3
UK
11
China
5
Canada
6
France
13
Singapore
7
Germany
12
Sweden
4
Switzerland
1
2
Hong Kong
Netherlands
Brazil
Denmark
5
10
1
Russia
10
Australia
Taiwan
5
Norway
Luxembourg
5
4
Source: allenovery.com
2
United Arab Emirates
6
M&A Activity by Sector
H1 2012 Global Deal Value by Sector
$300
$250
$200
$150
$100
$50
$0
Source: mergermarket.com
6
Overall Trend
Overall Activity
Global M&A activity is down 22% in the first half of 2012, compared to the same period last year,
with total deal value falling from US$ 1185 bn to US$ 930bn. Compared to the second half of 2011,
this represents a 10% decline.
Recent Trends
However after an extremely slow first quarter of 2012, M&A picked up somewhat between April and
June 2012 in all regions, amounting to a 21% increase globally on the first quarter of the year (by
value).
Cross-border Activity
Cross-border M&A continues to comprise a substantial proportion of all M&A activity (43% in the
year to date). Cross-border M&A between regions increased to 30% of total activity. Outbound M&A
from emerging markets saw a dramatic 54% increase on H1 2011 (by value)
Sources of Capital
M&A transactions continue to be predominately cash transactions. Cash only deals accounted for
70% of all M&A deals and 78% of cross-border M&A deals (by value)
Active Sectors
Energy, Mining and Utilities continue to dominate global M&A activity (value of deals in first half of
2012 = US$ 258 bn) - more than double the aggregate value in any other sector
Private Equity Activity
Private equity buy-outs were down by 22% compared to the same period last year as cost and
availability of finance continued to challenge the PE model. Buy-outs still account for 12% of global
M&A activity
Public Company Activity
8
MUMMERT & COMPANY M&A UPDATE
LONDON, 6TH AND 7TH SEPTEMBER 2012
CONTENT
EUROPEAN M&A MARKET OVERVIEW
1
ASIAN BUYERS ON THE RISE
2
ADDITIONAL CURRENT TRENDS AND DRIVERS
3
PAGE
10
OVERALL M&A MARKET RECENTLY DECLINING, WITH
LESS VOLATILE DEAL FLOW IN GERMANY
EUROPEAN M&A MARKET (VOLUME & VALUE)
Volume
7,000
Value in € bn
-5%
6,700
6,000
GERMAN M&A MARKET (VOLUME & VALUE)
5,500
5,500
4,900
5,000
-16%
4,000
3,500
2,858
3,000
1,200
700
1,000
600
800
2,000
Value in € bn
-1%
663
400
572
80
544
70
500
-7%
434
337
60
315
50
40
300
30
200
20
200
1,000
0
0
100
10
0
0
2007
2007
2008
2009
Volume
2010
2011
H1 2011 H1 2012
2008
2009
Volume
2010
Source:Mergermarket
11
2011
Value in € bn
Value in € bn
Germany outperformed the overall European deal flow which was down -16% H1 2012 yoy
PAGE
90
649
400
600
2,405
Volume
H1 2011 H1 2012
GERMANY IS DOMINATED BY SMALL- AND MID-CAP
DEAL FLOW
H1 2012 GEOGRAPHIC BREAKDOWN (VOLUME)
H1 2012 GEOGRAPHIC BREAKDOWN (VALUE)
Others
Switzerland
Iberia
5%
Italy
Benelux
Others
7%
UK
3%
Switzerland
6%
Iberia
9%
14%
Nordic
9%
Benelux
France
5%
6%
7%
13%
Germany
Germany
11%
Nordic
11%
10%
CEE
Especially UK and Italy deals stronger in value
12
25%
9%
10%
PAGE
UK
4%
CEE
Source:Mergermarket
12%
France
24%
Italy
GERMAN SPEAKING M&A-MARKET IN AN
EUROPEAN COMPARISON
Most active sectors for transactions in German speaking region –
Consumer, and TMT
Source: EMEA Heat Chart, tracked by mergermarket
PAGE
13
Industrials and Chemicals,
HEAT CHART – TOP 4 SECTORS IN GERMAN
SPEAKING REGION
Industrials and
Chemicals
 Historical strength of the German economy – outstanding position in Europe and
worldwide, numerous “hidden champions“
 Highly interesting for foreign investors due to excellent technology, solid
financials and international set-up
 Many strong consumer brands (e.g. food, beverage)
Consumer
TMT
 Attractive business segment in Germany due to solid domestic trend compared to
European neighbours and robust labour market
 Sector is characterized by high dynamics, strong growth rates in subsegments, and
attractive profit margins
 German businesses hold leading positions, in particular in the fields of media and
telecommunication
 High H1 2012 deal activity, a strong development which suggests a widening of
opportunities for local and overseas buyers
PAGE
14
Pharma / Medical /
 The pharmaceutical industry is strongly consolidated
OVERVIEW OF THE GERMAN
PRIVATE EQUITY-MARKET
CAPITAL UNDER MANAGEMENT (€ m)*
PRIVATE EQUITY - INVESTMENTS (€ m)**
38,968
37,195
3,643
26,498
1,699
1,151
1,452
1,468 1,420
15,571
1,143 1,240
922
2,202
4,465
1990
1995
2000
2005
2010
2011
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
15
2009
2010
Gradual recovery of the market, especially in the mid-cap segment
Still enormous amount of committed capital unemployed and strong backlog in LP proceeds are driving deal flow
Increasing number of Secondary-transactions
Source: Bundesverband Deutscher Kapitalgesellschaften
PAGE
924
187 211
2008



595
1,192
796 911
* German PE-funds and capital under management in Germany from pan-European Funds
** Only Buy-outs (excl. Venture capital)
2011
M&A DEAL FLOW IN SELECTIVE EUROPEAN
REGIONS (1/3)
Nordic
 The Nordic M&A market showed stable development due to strong economic performance
with constant GDP growth since 2009 and Nordic countries cementing their position as safe
havens amid financial turmoil
 In 2011 overall transaction value was at a peak (€ 49.9bn) with large transactions such as
the Danisco (Consumer / Foods) € 4.9bn and Phadia AB (Healthcare) € 2.5bn
 The Nordic M&A volume was down H1 2012 -21.5% to 322 deals and -20.4% in
transaction value YoY
 Strongest industry sectors in H1 2012 were Industrials (54 deals), Financial Services (27
deals) and Business Services (26 deals)
 Nordic is a important Private Equity market, still in H1 2012 PE involvement decreased to
102 deals (€ 7.7bn) compared to 135 deals in H1 2011 (€ 23.7bn)
United Kingdom
 The UK M&A market proved resistant to Europe’s financial difficulties and developed well
towards larger transaction values
 UK M&A transaction value was up H1 2012 24.4% and up slightly in volume to 523 deals
YoY
 Strongest industry sectors in H1 2012 were Business Services (85 deals), Financial Services
(53 deals) and Computer Software (42 deals)
 Large H1 2012 transactions include International Power (Energy) € 8.3bn and NDS Group
Ltd. (Computer Software) € 3.8bn
PAGE
16
 Private Equity involvement in the UK increased (78% in transaction value) to c. 214 deals
REGIONS (2/3)
France
 The M&A market volume experienced a relative decline, contributing 10% of total
European M&A volume in H1 2012 (13% in H1 2011) and 4% of total deal value (12% in
H1 2011)
 Strongest industry sectors in H1 2012 were Industrials (43 deals), Business Services (34
deals) and Consumer (28 deals)
 Large H1 2012 transactions include Accor SA (Leisure) € 1.5bn and Klepierre SA (Real
Estate) € 1.5bn
 Private Equity involvement in France plunged (-66% in transaction value) amid Eurozone
high-yield debt freeze with c. 102 deals (€ 5bn) in H1 2012 compared to c. 152 transactions
(€ 14.8bn) in H1 2011
CEE – Focus on
Poland
 The M&A market in Poland showed a robust development since the financial crisis due to
strong economical development with constant GDP growth
 In 2011 overall transaction value was at a peak with several large transactions such as the
Polkomtel (TMT) € 4.5bn and the Bank Zachodni WBK (Financial Services) € 4.2bn deal
 The Polish M&A volume was down H1 2012 -23.5% to 52 deals and -69.2% in transaction
value YoY due to a lack of large deals
 Strongest industry sectors in H1 2012 were Financials Services (8 deals), Consumer /
Foods (5 deals) and Industrials (5 deals)
PAGE
17
 Private Equity involvement in Poland remained on a high level with ca. 40 deals since
2011; large pan-European funds were active such as AXA Private Equity, Advent
REGIONS (3/3)
Turkey
 The M&A market in Turkey showed strong development despite the Eurozone crisis due to
robust economic development with high GDP growth (CAGR 2009-2011 12.2%) offering
relief for Europe’s Greek Debt crisis
 In H1 2012 inbound transaction value was at a peak with several large transactions such as
Dexia (Financial Services) € 2.8bn and Acibadem (Healthcare) € 1.2bn
 Turkish M&A volume was down H1 2012 -33.7% to 62 deals and up 15.6% in transaction
value YoY due to an increase in large deals
 Strongest industry sectors in H1 2012 were Industrials (8 deals), Consumer (7 deals) and
Manufacturing (7 deals)
 Private Equity involvement in Turkey plummeted further (-33% in transaction value) amid
concerns about taxation with ca. 16 deals (€ 1.6bn) in H1 2012 compared to ca. 23
transactions (€ 2.4bn) in H1 2011, but is set to rebound, offering a regional alternative to
countries still suffering from the Arab Spring revolts, and due to an ambitious privatization
program
PAGE
18
CONTENT
1
2
3
PAGE
19
IN-BOUND TRANSACTIONS* IN GERMANY 2006-2012
BACKGROUND OF TRANSACTION PARTNER
NUMBER OF IN-BOUND TRANSACTIONS*
Asia: 2006 - 2011
Country
+61%
Asia:
H1 2011 - H1 2012
348
318
+54%
253
237
H1 2011
2011
2010
2009
2008
2007
8
4
8
3
1
2
2
16
Japan
6
2
8
2
8
4
3
25
India
2
4
8
2
3
10
5
Malaysia
1
1
2
2
1
1
7
South Korea
1
2
1
2
1
6
Singapore
1
New Zealand
1
183
24
15
2007
2006
2008
2009
ROW



Source: mergermarket
PAGE
20
32
18
14
2010
13
2011
1
2
1
4
2
1
20
30
2
1
3
14
1
1
Philippines
Total Asia
3
4
Taiwan
173
165
1
2
1
2
Australia
177
1
2006
Σ 2006 -2011
H1 2012
China (incl. HK)
4
1
20
13
32
14
18
24
15
3
106
YoY change
54%
n.a.
129%
-22%
-25%
60%
400%
n.a.
n.a.
Total market
193
178
215
251
195
277
333
351
1,622
YoY change
8%
n.a.
-14%
29%
-30%
-17%
-5%
n.a.
n.a.
Share Asia
10%
7%
15%
6%
9%
9%
5%
1%
7%
H1 2011 H1 2012
Asia
Asian Inbound Transactions increased by 54% H1 2012 YoY
Strongest increase by Chinese investors
Persistent motivation: access to technology, brands and markets
* Only German targets; international buyers (excl. German investors); excl. withdrawn/lapsed deals
SELECTED TRANSACTIONS COMPLETED
BY ASIAN INVESTORS
Rank
Date of
publication
Target
Target sector
Enterprise
value (€ m)
Revenue (€ m)
EBITDA (€ m)
Seller
Bidder
Bidder country
1
21/06/2012
ADA - Das SystemHaus GmbH
IT
n.a.
122
n.a.
n.a.
Ricoh Company, Ltd.
Japan
2
08/06/2012
A. Monforts T extilmaschinen GmbH & Co.
Industrial Products and Services
KG
50
n.a.
n.a.
L. Possehl & Co. mbH
Fong's Industries Company Limited
China / Hong Kong
3
05/06/2012
Solibro GmbH
Energy, Industrials
n.a.
67
n.a.
Q-Cells SE
Hanergy Holdings Group Company Ltd.
China
4
04/06/2012
Weser-Metall-Umformtechnik
GmbH&Co.KG
16
n.a.
n.a.
n.a.
Sungwoo Hitech Co Ltd
South Korea
5
31/05/2012
Milei GmbH (30% Stake)
Consumer: Foods
n.a.
n.a.
n.a.
Arla Foods amba
Morinaga Milk Industry Co., Ltd.
Japan
21/05/2012
LSG Lufthansa Service Holding AG (34.3%
Stake)
Leisure, Services (other)
95
n.a.
n.a.
LSG Asia GmbH
Brahim's Holdings Berhad
Malaysia
Singapore T echnologies Aerospace Ltd.
Singapore
6
7
19/05/2012
Elbe Flugzeugwerke GmbH (35% Stake)
Industrials, T ransportation
110
n.a.
n.a.
European Aeronautic Defence and
Space Company EADS N.V.
8
21/04/2012
Schwing GmbH (majority stake)
n.a.
n.a.
n.a.
Schwing GmbH
XCMG Construction Machinery Co Ltd
China
9
12/04/2012
WUMAG T EXROLL GmbH & Co. KG
(Majority Stake)
n.a.
15
n.a.
n.a.
Yan Siyou (Private Investor)
China
10
01/04/2012
FbZ Formenbau Zuttlingen GmbH
n.a.
n.a.
n.a.
n.a.
Ningbo Huaxiang Electronic Co., Ltd.
China
13/03/2012
Kiekert AG (55% Stake)
Automotive, Industrial Products and
Services
n.a.
500
n.a.
Morgan Stanley; Silver Point Capital,
L.P. ; Bluebay Asset Management Plc
Hebei Lingyun Industrial Group Co.,Ltd.
China
12
05/03/2012
Dow AgroSciences LLC (European Dithane
Chemicals and Materials
Fungicide Business)
38
n.a.
n.a.
Dow AgroSciences LLC
Indofil Chemicals Company
India
13
14/02/2012
T alaris Limited
IT
777
135
13
Carlyle Europe Partners III LP
Glory Ltd.
Japan
14
10/02/2012
MGlas AG
Medical
26
n.a.
n.a.
n.a.
Nipro Corporation
Japan
15
09/02/2012
T enneT B.V. (BorWin1 and BorWin2)
(49% Stake)
Energy, Utilities (other)
490
n.a.
n.a.
T enneT B.V.
Mitsubishi Corporation
Japan
16
31/01/2012
Homapal Plattenwerk (50% Stake)
Construction, Industrials
60
n.a.
n.a.
n.a.
Fletcher Building Limited
New Zealand
Sany Heavy Industry Co Ltd; CIT IC Capital Partners
China / Hong Kong
11
17
27/01/2012
Putzmeister Holding GmbH
Construction, Industrials
500
570
n.a.
Karl Schlecht Stiftung (Private
Investor
18
11/01/2012
UniCon Software GmbH
IT
10
n.a.
n.a.
n.a.
Fujitsu Limited
Japan
19
04/01/2012
Swissrisk Financial Systems GmbH
(Controlling Stake)
Computer Software, Financial Services
n.a.
n.a.
n.a.
Amazing Lab
Dion Global Solutions Limited
India
20
02/01/2012
Sunways AG
Energy, Industrials
53
n.a.
n.a.
n.a.
LDK Solar Co Ltd
China
High interest of Asian buyers in the IT and Industrials sector
Source: mergermarket
PAGE
21
Deals with Chinese bidder
CONTENT
1
2
3
PAGE
22
M&A – QUO VADIS?
OVERVIEW OF TRENDS AND DRIVERS
 Increased Asian in-bound deal flow from China, India, Japan
Transactions –
Strategic investors
 Growing professionalism of Asian buyers
 Generally strong balance sheets and solid profit situation, less focus on restructuring
 Customer access (machinery & equipment industry, automotive, etc.) as main motivation,
but technology focus still important
Transactions –
Financial investors
 Private Equity funds are still pushing for exits with pressure to clean-up portfolios and
return proceeds to LPs
 Tendency to secondaries and secondary portfolio deals / end-of-lifecycle processes
 Deal activity for the German speaking region, Nordic and UK (“safe havens for less
cyclical markets”) and growing economies within CEE (Poland) and Turkey expected to
remain strong
Financing –
credit markets
 High market uncertainty and volatile business sentiment, which makes the establishment
of a syndicate difficult
 Leverage levels and pricing fairly stable compared to 2011, still significantly behind precrisis levels
 Still no return to covenant “light” contracts
PAGE
23
 Trend away from classic bank debt financing towards alternative financing structures
MUMMERT & COMPANY CORPORATE FINANCE GMBH – MUNICH
Prinzregentenstr. 48 | 80538 Munich | Germany
Phone: +49 (89) 23 23 77 70 Fax: +49 (89) 23 23 77 77
MUMMERT & COMPANY CORPORATE FINANCE GESMBH – VIENNA
Universitaetsring 8 (Dr.-Karl-Lueger-Ring 8), 3rd floor | 1010 Vienna | Austria
Phone: +43 (1) 523 82 07 60 Fax: +43 (1) 523 82 07 62
MUMMERT & COMPANY LIMITED – LONDON
11-12 Tokenhouse Yard | London EC2R 7AS | United Kingdom
Phone: +44 (207) 073 26 89 Fax: +44 (870) 762 75 25
MUMMERT & COMPANY – PRINCETON
33 Witherspoon Street | Princeton, New Jersey 08542 | USA
Phone: +1 (609) 924 11 70 Fax: +1 (609) 924 11 71
North American Update
Michael D. Benson
Managing Director
Stout Risius Ross, Inc.
Investment Banking
Valuation & Financial Opinions
Dispute Advisory & Forensic Services
Economic Health of the U.S. Manufacturing Sector
Major Appliance Shipments
46.1
45.0
40.8
40.0
Light Vehicle Production
20.0
50.0
47.0
46.7
16.3
39.8
38.2
17.2 17.5 17.5 17.5 17.5 17.6
18.0
44.1
42.5
36.5
38.2
16.0
36.5
15.8 15.815.3 15.1
14.6 15.3
37.1
35.0
13.1
12.6
14.0
11.9
12.0
30.0
10.0
25.0
8.6
8.0
20.0
6.0
15.0
4.0
10.0
2.0
5.0
0.0
0.0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012P
Housing Starts
2,500
Class 8 Heavy Truck Volume
8,000
7,000
2,000
6,000
5,000
1,500
400
367
350
326
304
260
250
224
4,000
3,000
2,000
267
261
257
170 179 183
201
1,000
320
308
300
238
234
247
226
207
200
153
150
127
100
500
1,000
Housing Starts
0
50
Existing Home Sales
0
0
Source: Association of Home Appliance Manufacturers (includes washers, dryers, dishwashers, refrigerators, freezers, ranges and ovens), St. Louis FRED, IHS, Ward’s, CIRA, and industry research.
2
Economic Health of the U.S. Manufacturing Sector
Global GDP Growth
United States GDP Growth
7.0%
5.0%
4.3%
4.0%
4.0%
4.0%
3.9%
5.0%
3.5%
3.0%
2.1%
2.7%
3.0%
1.0%
2.0%
1.3%
-1.0%
1.0%
-3.0%
0.0%
-5.0%
2004
2005
2006
2007
2008
2009
2010
2011
-1.0%
-7.0%
-9.0%
-2.0%
Q1 Q2Q3Q4Q1 Q2Q3Q4 Q1 Q2Q3Q4Q1 Q2Q3Q4Q1 Q2Q3Q4
-2.2%
2004
-3.0%
Source: The World
Bank
2006
2005
2007
Historical
Q1 Q2Q3Q4Q1 Q2Q3Q4Q1 Q2Q3Q4
2008
2009
2010
2011
Q1Q2 P
'12 '12
Projected
Source: U.S. Bureau of Economic Analysis
Purchasing Manager’s Index
Consumer Confidence and Unemployment
12.0%
110
10.0%
100
65.0
60.0
55.0
8.0%
90
6.0%
80
4.0%
70
2.0%
60
50.0
45.0
40.0
Unemployment Consumer
35.0
Confidence
50
0.0%
Jul-02
11
Jul-03
Jul-12
Jul-04
Jul-05
Jul-06
Jul-07
Jul-08
Jul-09
Jul-10
Jul-
Source: U.S. Bureau of Economic Analysis, University of Michigan Consumer Confidence Report
30.0
Jul-02
11
Jul-03
Jul-12
Jul-04
Jul-05
Source: Institute for Supply Management
Jul-06
Jul-07
Jul-08
Jul-09
Jul-10
Jul-
3
Overview of United States M&A Activity
Historical United States M&A Volume and Value
4.5
4.0
$450
3.73.7
3.7
3.53.4
3.5
$500
3.9
4.0
3.3
2.72.8
3.0
2.5
2.8 2.9 3.0 2.82.7 2.9
3.0 3.1 3.2
3.4
3.4
3.2
2.3
$350
$300
2.4
2.0
1.9
$400
2.6
2.5
2.0
3.2
2.1
$250
$200
1.5
$150
1.
0
0.5
$100
$50
0.0
$0
Q1 Q2Q3Q4 Q1 Q2Q3Q4 Q1 Q2Q3Q4 Q1 Q2Q3Q4 Q1 Q2Q3Q4 Q1 Q2Q3Q4 Q1 Q2Q3Q4 Q1Q2
2005
2006
2007
2008
Volume
Source: Capital IQ
2009
2010
2011
'12
Value
4
United States M&A Activity
1H 2012 US M&A Activity by Sector
Telecommunications
2.0%
Other*
2.9%
Real Estate
3.3%
Leisure
4.9%
Energy, Mining &
Utilities
23.1%
Financial Services
6.0%
Business Services
7.5%
Pharma, Medical &
Biotech
13.8%
Industrials & Chemicals
11.0%
Technology
11.7%
*Includes Media, Transport, Construction, Agriculture, and Defense sectors
Consumer
13.8%
5
5
Prospects for Outbound/Inbound Activity

Several factors drive investment activity and direction:
o US economic health (on its own) and versus others globally
 Drove inbound from China
 Slowed outbound to Europe
o Industry health versus others globally
 Auto outbound activity (except inbound from Japan)
 Pharma/Biotech outbound
 General Manufacturing/Technology inbound
o Currency/FX
 Driving inbound from Japan/Asia in general
o Government Regulation
 Slowing outbound to Brazil and China
o Availability of capital/financing
 Slowing outbound to Europe and China
o Political stability/rule of law
 Slowed outbound to Mexico and Russia
 Drove inbound to U.S. from almost everywhere
Prospects for Outbound/Inbound Activity
H1 2012 US Outbound Volume by Country
India
4.6%
Australia
4.6%
H1 2012 US Inbound Volume by Country
Japan
3.1%
Germany
7.8%
UK
26.2%
Denmark
4.6% UK
Singapore
5.9%
33.3%
China
9.8%
Germany
6.2%
Brazil
6.2%
Canada
15.7%
Israel
10.8%
Canada
23.1%
France
10.8%
Source: Allen & Overy LLP
Japan
27.5%
77
Summary of M&A and Financing Market Trends
Given the following factors, our outlook for 2012 remains favorable:
o
Taxes: The looming expiration in the 15% maximum capital gains tax rate means that business
owners must weigh potential increases in multiples and earnings against a backdrop of significantly
adverse tax treatment for proceeds of sale
o
Demographic: Time continues to favor the need for liquidity events among private business owners
o
Accommodative credit markets: Competition among banks for qualified borrowers is as great as it was
in 2007
o
Cash rich strategic buyers: Lower organic growth prospects, more reasonable valuations,
accommodative senior debt markets, and a record $2 billion in cash on balance sheets have resulted
in a return of the strategic buyer
o
Deal-hungry financial buyers: Favorable credit markets and an estimated £425 billion capital overhang
($100 billion of which is nearing the end of its investment horizon), will continue to provide impetus for
investors to remain competitive in transactions; it should be noted that the $425 billion in dry powder
actually translates in $1 trillion or more in purchasing power, given leverage available in today’s
marketplace.
Despite the strong tailwind from an M&A perspective, significant risks emerged in 1H 2012 that resulted in a cautious, “wait
and see” attitude among buyers and sellers and caused a slowdown in processes
o
Disturbances within the European Union’s fiscal agendas
o
Run up in commodity prices
o
Continued elevated unemployment levels
o
Continued malaise within housing and construction
Investment Opportunities around the World and Stimulating Growth
Main Investment Opportunities for Latin America
Sergio Michelsen
September 2012
Table of Content
I.
Latin America Overview
II. Latin American Inbound FDI
III. Latin American Outbound FDI
IV. Opportunities in Latin America
V. Opportunities for Latin American
Companies Abroad
34
•
Low credit rates = Investment.
•
Access to capital markets in
developing and developed economies
•
Growth and sophistication of local
and regional capital markets
•
MILA and integration trends
•
Intense M&A activity in the region
35
•
•
Fast growing population and economies
•
588 million inhabitants
•
Regional GDP growth of 4,7%*
Latin American countries have undertaken various promarket reforms:
•
Financial derivatives regulation
•
Clearing houses
harmonization
•
Financial consumers and investors protection
mechanisms
and
settlement
processes
*Estudio Económico de América Latina y el Caribe, 2010-2011. CEPAL
36
FDI in Latin America
Countr
Agribusine Oil &
Mining
y
ss
Gas
Constructio
Power/
Bankin
n
IT
Retail
Electricity
g
Infrastruct
ure
Argenti
na
*
Brazil
Chile
Colomb
ia
*
*
*
*
*
*
*
*
*
*
*
*
*
México
Paragu
Source: Latin Lawyer, Investment Map, information received from colleagues
*
*
*
*
*
*
*
*
*
37
FDI from Latin America
Power
Constructi
Countr Minin Agribusin Oil &
/
Bankin
on
Services Retail
y
g
ess
Gas Electric
g
Infrastruct
ity
ure
Argenti
na
*
Brazil
Chile
Colomb
ia
México
Paragu
*
*
*
*
*
*
*
*
*
*
Source: Latin Lawyer, Investment Map, information received from colleagues
*
* *
*
*
*
38
Opportunities in Latin America
During the last few years the following sectors have
been booming in the Latin American M&A activity:
•
Power /Electricity
•
Banking and Financial Services
•
Pharmaceutical
•
Oil & Gas
•
Mining
•
Tourism
39
Opportunities for Latin American Companies Abroad
Under current conditions of the world economy Latin American Companies have found
opportunities for expansion in various sector:
•
Power /Electricity
•
Banking and Financial Services
•
Cement
•
Construction
•
Mining
•
Retail
40
Countries in which Latin America is investing
CHILE
1.Retail – Peru, Colombia
2.Forestry – Colombia, Brazil
3.Fetzer Vineyard – USA
4.Magotteaux – Belgium
PERU
1.Ecuador
2.China
3.Germany,
4.Chile
5.Argentina
6.Brazil
7.Colombia
8.England, Canada and France.
41
COLOMBIA
1.Banking– Central America, South America, USA.
2.Cement – Central America , USA
3.Energy – Brazil, Chile, Peru
4.Textiles – Central America, USA, China, Korea, Italy
5.Nutrition – Central and South America
6.Ceramics – USA, China, Mexico
7.Construction – Central America
MEXICO
1. Telecommunications - Latin America, Netherlands
2. Cement – World wide
3. Nutrition – Latin America, USA
4. Farmaceutical - Chile
42
PARAGUAY
Sectors
Soybeans, feed, cotton, meat, edible oils, electricity, wood, leather
Countries
Uruguay 15.4%,
Brazil 11.7%,
Argentina 10.4%,
Chile 8.5%,
Russia 6.7%,
Netherlands 5.6%,
Germany 4.4%,
Italy 4%
43
Recent Legislation Integration Experiences
•
MILA (Mercado Integrado Latinoamericano)
• Starts as a financial initiative driven by the
stock exchanges and the Multilatinas
• The creation of an integrated market
requires developments:
• Allow stock brokers to act directly in
other markets. (integration of brokers is
taking place)
44
Multilatinas
•
Key role in regional growth.
•
Characteristics:
• Latin American local companies
• Multinationals
• Regional presence
45
Multilatinas
•
Growth during the first decade of 2000, driven by low cost financing and excessive
concentration in their respective countries.
•
Generators of direct foreign investment from and to Latin American countries.
46
Credits
I would like to thank my colleagues who contributed with valuable information and opinions for
this presentation:
•
Luis Marcio Torales O. - Vouga & Olmedo Abogados (Perú)
•
Ramón I. Moyano – Estudio Beccar Varela (Argentina)
•
Alejandro Antillon – Pacheco Coto (Costa Rica)
•
Pablo San Martín - San Martín, Suarez y Asociados (Argentina)
•
Michael D. Benson - Stout Risius Ross Advisors (USA)
•
Jaime Carey - Carey y Cía. Ltda (Chile)
•
Juan José López – Basham (Mexico)
•
Ronaldo Veirano – Veirano (Brazil)
47
Calle 70 A No. 4 - 41
Bogotá – Colombia
Tel:
(571) 346 20 11
Fax: (571) 310 06 09
Email: smichelsen@bu.com.co
URL: www.bu.com.co
An Overview of the Investment
Market in China
John Z. Huang
Senior Partner
Dacheng Law Offices
Agenda
Current Economic and Investment Climate in China and Asia
Outbound Chinese Investment
Inbound Chinese Investment
Investment Environment in China
Eurozone Crisis: Impact and Consequences on Chinese
Investment
Brief summary of current Investment Climate in China
Economic Development in China and Chinese Investment Market:
•2001 – World Trade Organisation  exponential increase in investments
•The world’s second largest economy – expected to be the first in 2020-2030
•Increase in purchaser power and acquisition of consumer goods
•China – highest personal savings in the world  good opportunity for investors
•China is the second largest recipient of FDI globally.
Current Economic Health in the rest Asia :
•Current sluggish global economy has impacted Asia’s growth
•Outlook has dimmed - GDP growth to reach 6.6% in 2012 and 7.1% in 2013 due to the
weak global economic environment and slower growth in China
•Inflation in developing Asia is projected to moderate to 4.4% given the weaker outlook
on economic growth and the declining trends in international oil and food prices
Outbound Foreign Direct Investment
Outbound Foreign Direct Investment Summary:
• Has slowed down this year Outbound direct investment rose to 8.5%
in 2011 (compared to 2010 – where there was an annual increase of
22%)
• Economic growth target of China has been reduced accordingly
• Chinese investors  $75 billion in FDI in 2011
• Investment in foreign financial sectors fell 29.7% in 2011 (because of
caution of the international financial problems in Europe and US)
• Government experts predict however that overseas direct investment
will rise in the coming year  China has set goals to increase FDI at an
average rate of 17% for the 2011-2015 period.
Outbound Foreign Direct Investment
Where and in what sectors is China investing in?– Outbound Investment
Hotspots
Locations :
•Asia, Europe and North America continue to be the hottest destinations for Chinese investment.
•Strong investment links with Africa which continue to grow – in 2009 China became Africa’s largest trading partner. In 2010
trade between the two countries reached $126.9 billion. China also relies on African nations for one-third of its imported crude
oil.
Sectors of Outbound Investment Trends in order of importance :
1) Manufacturing sectors
3. Farming
2)Distribution
4. Fishery
5. Construction
Prospective Investments :
•Investment is likely to rise in Australia as state-owned enterprises become more and more commercially minded and expand.
In the last 6 years, over $45 billion has been invested in Australia.
 80% in mining
12% in oil and gas
Investment has been greatest in New South Wales
Expected increase in investment in Australian farming land in particular
•Growing trend of China investing in stable supplies of natural resources.
•Surging investment in Africa’s mining industry - last year it reached $15.6 billion in 2011 and is expected to continue to grow.
Inbound Foreign Direct Investment in China
Inbound Foreign Direct Investment (FDI) Summary:
Intro/background:
•Foreign Direct Investment (FDI) has increased considerably in the last decade –
reached over $185 billion in 2010.
•China is the second largest recipient of FDI globally.
Current climate:
•2012: Investment fell 0.7% from a year earlier to $8.4 billion.
•From January to July 2012, Newly Approved Foreign-invested Enterprises
amounted to 13,677, down by 12.33%
•2012: the actual use of foreign investment reached US$ 66.669 billion, down by
3.64% (compared to 2011)
Inbound Foreign Direct Investments
Where and in what sectors is China the Recipient of
Investment? – Inbound Investment Hotspots
Sectors:
•Energy investments -China is 4th hot spot in the world
•Property sector - Foreign investment grew 57.3% in 2010
•Service Industry hot spot for investment full liberalisation of China’s service industry and good
prospects for economic growth and huge service demand
Locations:
•First half of 2012 – First tier cities continue to expand economies – average 12% per year. However,
second tier cities averaged at 18.5%.
•Second tier cities attract investor because:
- Surging demand,
- Lower production costs,
- Favourable policy shifts.
- Lower labour costs, - Lower energy and rent costs - Improved infrastructure
•However, lack of skilled labour in second tier cities and transportation costs (ex: to the East Coast) 
potentially wipe out the labour cost savings of locating in second tier cities.
•Nonetheless, second tier cities are investment hotspots
Bribery in China
•Is not uncommon (see 2012 case of Mr Peterson)
•However, is less prominent  agencies have been set up to ensure effective
supervision and regulate behaviour of Chinese companies when they invest abroad
and push them to abide by laws/regulations/business codes.
•Between July 2005 and December 2011, anti-graft agencies cracked more than
100,000 bribery cases involving 26 billion RMB(4.13 billion US dollars)
Movement of multinational companies in China
•Some companies are leaving China (labor cost increase - Authorities have said
that they expect China's average minimum wage to grow at least 13% annually
over the next five years- , SEC rule is becoming more strict etc.)
•Targeting second tier cities (see above).
Difficulties and Barriers for M&A in China:
1.Regulation
2.Hidden Liabilities
3.The Real Control of the Acquired Business
4.Dealing with State-owned companies
5.The Legality of VIE Structure
Investment Strategies to overcome these barriers:
•In order for an M&A transaction to be successful, the company in question must meet
China’s criteria for acceptable foreign investment. To do so, the company must demonstrate a
commitment to shares in high-value technologies and skills.
•Creating a joint venture may help to prevent M&A transactions from being hit by China’s
limits on foreign ownership of business in tightly controlled sectors such as banking, life
insurance etc.
6 Factors that Stimulate Investment in China:
1. Capital Investment
2. Competitiveness
•China’s attractiveness as a destination for investment rests on
- Development of infrastructure
- Productivity and work force skills
- Resource availability
- Development of business value-chain
3. Regulatory Environment
•Some mandatory joint-venture partnerships in China (Government Agent or local Company as a partner)
•Chinese Government’s promotion of investment activities – financial incentives (tax breaks, grants, low-cost loans
etc.)
4. Stability
•Economic and social
5. Local Chinese Market and Business Climate
•The ability of enterprises – backed by foreign capital – to sell a sizeable local market makes China an attractive
destination for FDI.
•Economic growth and FDI can create a “success domino effect”
6. Openess to Regional and International Trade
The Eurozone crisis: Perceptions, effects and
consequences on Chinese Investment abroad
Effects and Consequences on Chinese Investment:
•Growth in overseas direct investment slowed sharply in 2011
•Outbound direct investment rose to 8.5% in 2011 (compared to 2010 – where there was an annual increase of 22%)
•Investment in foreign financial sectors fell 29.7% in 2011 (because cautious of the international financial problems in
Europe and US)
•Effects on the Chinese financial market  influence on stock and bond prices
•Effects on the Chinese trade market  declining export to Europe
However:
•High level of investment and market confidence on China’s capital market  stable Shanghai Stock Exchange
•High level of domestic market in China  predicted to be a “magnet factor” for FDI in China
Investment Propspects:
•Government experts predict that overseas direct investment will rise in the coming year  China has set goals to increase
FDI at an average rate of 17% for the 2011-2015 period.
•Market observers and government officials have emphasised that now is an opportune time for Chinese companies to invest
overseas as the price of quality assets have fallen in light of the Eurozone crisis and global economic slowdown.
Thank you!

Michael Benson, Managing Director, Stout Risius Ross (SRR) Dirk

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