According to M&A Predictor, 2018 is expected to be a robust year of global M&A activity, with appetite and capacity for transactions expected to increase. For the year ahead, global predicted appetite for M&A deals is projected to increase by 5 percent, while predicted capacity is also projected to go up over the same period by 17 percent.
Total deal value in Q1 2018 soared to just past US$1 trillion (EUR 850 bn), accompanied by a 17 percent decline in volume to 8,537. As a result, average deal value in the first quarter of this year was also up significantly, rising about 42 percent to a 10-year high of US$124.6 million per deal.
M&A in 2017 was very similar to 2016 – down somewhat from 2015’s record highs but certainly robust, with mid-market transactions continuing to be a driver of volume. Activity started to pick up in Q3 and through Q4 to close the year strongly, with December the strongest moth of the year.
2017 deal volume rose to 39,968 from 37,484 or about 7 percent while deal value declined 8 percent to US$3.479 trillion from US$3.797 trillion. Mixed global factors exerting an impact on 2017 activity included low interest rates, geopolitical issues and US tax legislation that was in the works.
Cross-border deals changed little in 2017 compared with 2016, with more than 9,000 deals and more than US$1 trillion in overall deal value. From the sectoral perspective, the most attractive acquisition targets were the innovative technologies and digital capabilities.
According to the KPMG local team analysis, 42 transactions with overall deal value almost EUR 456 million were completed last year. It is similar development to the one in 2016. KPMG itself has been currently assisting with record volume of transaction. As the exclusive advisor on the buyer or seller side, the team led by partner Stanislav Šumský closed 7 transaction in the past 18 months and in 40 cases it advised on financial and tax due diligence, financial modeling or negotiation. This is a third more than the average over the past five years.
Most significant factors influencing acquisitions in Slovakia are growing living standards and household consumption. This increases the attractiveness of companies selling quality consumer goods, products of established brands or retail companies as such. This was for example reflected in the acquisitions of the Slovak retail network CBA, which was taken over by an investment fund managed by Enterprise Investors. Overall, 8 acquisitions were recorded in this sector.
Growing industry and economy have affected transaction activity also in other sectors. Industrial production has traditionally been a source of significant transaction activity, with 7 deals recorded in 2017. A major impulse is the construction of Jaguar Land Rower plant near Nitra and associated subcontractors’ infrastructure. An example is the entry of the Portuguese company Sodecia into Matador Automotive, one of the leading automotive suppliers in Slovakia. Equally important is the investment of the Korean concern LG in c2i, a Slovak innovative producer of carbon components for automotive and aerospace sector.
Traditionally strong position both in the number and the value of transactions has the real estate sector. In 2017, this segment recorded 9 transactions. The attractiveness of local assets is confirmed by the fact that Slovak real estate can also attract global investors. Example of that is the Hong Kong based company CNC, which acquired the Prologic Park, a logistic complex in Galanta, representing the largest transaction last year.
“The activity in the past few years confirms that for strategic investors acquisition is still one of the most attractive companies´development drivers, whether to support company´s revenue growth, expanding product portfolio or acquiring an important know-how,” said Stanislav Šumský, Partner responsible for Deal Advisory.
M&A Predictor looks at the appetite and capacity for M&A deals by tracking and projecting important indicators 12 months forward, including P/E (price/earnings) ratios, a good guide to the overall market confidence, and net debt to EBITDA (earnings before interest, tax, depreciation and amortization) ratios, to gauge the capacity of companies to fund future acquisitions. The Predictor covers the world by sector and region and is produced using data comprising 2,000 of the largest companies in the world by market capitalization. All raw deal data is sourced from CapitalIQ and Dealogic, with further analysis provided by KPMG. Dealogic data is used to provide historical deal trends in order to compare the predictions with actual results.