Transaction Trends No. 1-2015

Transcript

Transaction Trends Transaction Advisory Services 1st edition 2015 Norwegian transactions market update Strong year-end performance driven by continued appetite from foreign investors Transaction Trends, published by EY Transaction Advisory Services, is a quarterly publication that aims to identify trends in the Norwegian transactions market. Data presented in this newsletter cover all transactions where the 500 largest companies in Norway have participated as either target, buyer or vendor. This makes Transaction Trends the most comprehensive transaction newsletter available for the Norwegian market. Also in this edition: • Capital Confidence Barometer Last Twelve Months Number of Transactions by Industry Source: Mergermarket Energy 22 Materials 8 Industrials 33 Consumer Discretionary 14 Consumer Staples Healthcare 12 were public has also been notable this quarter, maintaining average deal size at a relatively high level. In this issue, we have included a summary of EY’s 11th biannual global Capital Confidence Barometer (“CCB”). The 1,600 respondents – representing 62 countries and 18 sectors predict healthy growth for M&A globally, which should take the global market back to pre-crisis levels. Public Public Private Private Public 1 Financials Number of transactions 5 3 LTM Source: Mergermarket Source: Mergermarket Source: Mergermarket 16 Telecom Private Number of transactions Number of transactions 9 Information Technology Utilities During the fourth quarter of 2014, the 500 largest Norwegian companies announced a total of 33 transactions, which is significantly higher than the previous quarter, and the strongest fourth quarter since 2010. The number of transactions over the last 12 months amounted to 123, compared to 115 as of the previous quarter, which is the highest level since Q4 2011. Among the top ten deals by value, eight had foreign buyers. The share of the target companies which 35 33 35 30 35 30 25 30 16 25 20 25 15 20 20 10 15 15 17 5 10 10 0 55 32 34 31 34 34 2925 2828 24 29 26 22 8 26 25 25 25 16 25 25 22 25 24 18 14 24 1616 810 22 22 16 8 16 13 14 14 14 14 17 10 10 11 13 13 14 14 11 14 14 17 11 17 20 25 3333 28 26 16 1717 20 20 25 11 16 16 32 32 29 25 11 16 11 11 11 11 8 16 16 15 10 88 12 15 15 12 10 10 33 140 31 31 120 22 LTM LTM 33 33 100 25 25 80 11 22 22 18 18 13 14 11 20 12 12 12 12 13 13 14 014 60 11 11 22 22 40 Q311 Q411 Q112 Q212 Q312 Q412 Q113 Q213 Q313 Q413 Q114 Q214 Q314 Q414 00 LTM LTM LTM 140 140 120 120 100 100 80 80 60 60 40 40 11 11 Q311 Q311Q411 Q411Q112 Q112Q212 Q212Q312 Q312Q412 Q412Q113 Q113Q213 Q213Q313 Q313Q413 Q413Q114 Q114Q214 Q214Q314 Q314Q414 Q414 20 20 00 Key highlights and market outlook The previous quarter turned out as the best 4th quarter since 2010 with 33 transactions announced among the 500 largest Norwegian companies despite the turmoil. The notable increase in deal volume was, however, solely driven by foreign buyers; the number of deals pursued by Norwegian buyers saw a marginal decline compared to Q3 2014. Overall, the Norwegian M&A market has become less predictable in the near future. With lasting change in fundamental drivers such as a lower oil price and a weaker Norwegian Krone will force various industries to rethink their strategies and create M&A opportunities for both foreign and local investors going forward. On 8 December, the global private equity firm Apax Partners LLP announced a voluntary cash offer to acquire Evry ASA, the Norwegian listed IT company, at NOK 16 per share, a 7.0% discount to the closing price the day prior to the announcement date. The potential transaction will be conducted via Lyngen Bidco AS, a company indirectly owned by Apax. The offer values the entire equity, and targeted shares, at NOK 4.27bn, based on 267m outstanding shares at the offer price. The Board of Directors unanimously recommended the offer. Shareholders representing 73.9% of shares (Posten Norge AS, Telenor Business Partner Invest AS, and Folketrygdefondet) have accepted the offer based on certain conditions. Evry will remain headquartered in Norway posttransaction. Top transactions transactionslast last quarter deal value, USDm) Top quarter (by(by deal value, USDm) On 27 November, Oslo based shipping and offshore brokerage and investment bank RS Platou ASA was acquired by London based shipping services group Clarkson Plc, for a total consideration of GBP 281.2m. GBP 210.9 will be paid through issue of Clarkson common shares, GBP 46.7m will be paid through issue of loan notes, and GBP 23.5m will be paid in cash. The transaction will speed up Clarkson’s approach to provide clients with quality services in all shipping and offshore markets. On 24 November, Cyprus based investment company Geveran Trading Co. Ltd., launched a mandatory open offer to acquire the remaining 62.46% stake in the Norwegian based and listed real estate company Norwegian Property ASA. A few days prior to the offer, Geveran Trading had acquired 25,633,104 shares via an onmarket transaction, increasing its total shares to 205,910,242, or 37.5%, and hence had to launch the mandatory offer. On 29 October, Silk Bidco, a joint venture vehicle indirectly owned by Home Capital AS (controlled by P. Stordalen), Periscopus AS (controlled by T. Hegnar) and investment funds managed by TDR Capital LLP, announced a voluntary public recommended cash offer to acquire Norway based and listed transport corporation Hurtigruten ASA. The offer of NOK 7 per share represents a 56% premium over the closing price the day prior to announcement. On December 19, Silk announced completion of the offer and intention to initiate compulsory acquisition of outstanding shares (<2%) and apply for delisting. On 24 November, Hong Kong based Bluestar Elkem Investment Co, a subsidiary of China National Bluestar Group, agreed to acquire the Oslo listed manufacturer and distributor of solar cells and modules REC Solar ASA. The offer price of NOK 108.5 per share represents a 16% premium over the closing price one day prior to the announcement date, and values the entire equity at NOK 4.34bn. Source: Source:Mergermarket Mergermarket Ann. Ann. Date Date Oct-14 Oct-14 Nov-14 Nov-14 Dec-14 Dec-14 Dec-14 Dec-14 Oct-14 Oct-14 2 Target Target Vendor Vendor Buyer Buyer Deal Dom. Deal Target Deal Dom. Deal Target IndustryIndustry Value Turnover Value Turnover Shah Deniz gas field (15.5% Stake); Shah Deniz gas field (15.5% Stake); South Caucasus Pipeline Company South Caucasus Pipeline Company Limited (15.5% Stake) Statoil ASA Petronas Gas Berhad Norwegian Property ASA (62.46% Stake) - Geveran Trading Co. Financials 1,908 Ltd. Geveran Trading Co. Financials Statoil ASA Limited (15.5% Stake) Norwegian Property ASA (62.46% Stake) DnB NOR Eiendomsinvest I ASA DnB NOR Eiendomsinvest I ASA Evry ASA - Hurtigruten ASA | Transaction Trends 1st edition 2015 - - Evry ASA Hurtigruten ASA - - Starwood Global Financials Starwood Opportunity Fund Global X Opportunity Fund X 2,250 1,458 Financials Information 1,055 Technology Information Apax Partners LLP Silk Bidco AS - Energy Ltd. Apax Partners LLP - Energy Petronas Gas Berhad Silk Bidco AS ConsumerTechnology 773 Discretionary Consumer Discretionary n/a 2,250 127 1,908 n/a 1,458 n/a 127 n/a 2,096 1,055 2,096 540 773 540 Activity Breakdown In the fourth quarter of 2014, we have observed an increasing number of foreign investors entering the Norwegian M&A market; 58% of the deals had foreign buyers, compared to 40% in the previous quarter and 46% over the last 12 months. The share of foreign buyers is even more significant if we only take the top ten transactions into account, where only two buyers were domestic. The increase in foreign buyers is largely due to more buyers from Europe and the Americas, whereas the share of buyers from the Nordics and Asia-Pacific has remained stable. Buyer Region Source: Mergermarket LTM Q4 2014 12% 42% 19% 24% 0% 9% Industrials is still the largest sector with 33 deals over the last 12 months, with Energy coming in second, with 22. It is worth noticing, however, that the gap between the two has more than doubled to 11 deals, from five in the previous quarter (33 vs 25 in industrials and energy, respectively). 13% 54% 1% 10% 4% 12% Norway Americas Nordics (excl. Norway) Asia-Pacific Europe (excl. Nordics) Other Transaction Type Transaction Type Source: Mergermarket Source: Mergermarket 2008 - 2014 2008 - 2014 Domestic Domestic CrossCross BorderBorder 46% 54% 46% LTM 43% 57% Q4 2014 42% 58% 43% LTM 42% Q4 2014 54% 57% 58% Activity by byindustry industry Activity Source:Mergermarket Mergermarket Source: Number of Transactions Number of Transactions Industry Industry Energy Energy Materials Materials Industrials Industrials Consumer Discretionary Consumer Discretionary Consumer Staples Consumer Staples Healthcare Healthcare Financials Financials Information Technology Information Technology Telecom Telecom Utilities Utilities Deal value not reported (across industries) Deal value not reported Total (across industries) Total 3 DealDeal Value (USDm) Value 0$0 – 100 - $100 m 100+ > $100 m 0$0 – 100 - $100 m 100+ > $100 m 0 – 100 $0 - $100 m 100+ > $100 m 0 – 100 $0 - $100 m 100+ 0>–$100 100 m $0 - $100 m 100+ 0>–$100 100 m $0 - $100 m 100+ 0>–$100 100 m $0 - $100 m 100+ 0>–$100 100 m $0 - $100 m 100+ 0>–$100 100 m 100+ $0 - $100 m 0>–$100 100 m 100+ $0 - $100 m > $100 m | Transaction Trends 1st edition 2015 Q4 2014 Q1 2014 2 2 3 3 1 2 1 2 2 1 - 3 2 2 2 2 2 2 3 2 1 - 12 15 33 34 LTM LTM 7 9 6 1 7 4 5 3 6 2 3 7 1 3 - 6 9 3 1 10 6 6 4 2 5 4 6 4 3 2 52 48 123 112 2008 –2008 2013– 2014 29 52 16 19 62 37 33 21 25 24 6 6 23 13 41 12 9 14 3 11 23 42 13 18 52 31 27 17 23 19 6 6 23 9 35 8 9 11 3 9 297 246 724 630 Activity Breakdown Deal volume saw a notable increase in Q4 compared to the previous quarter, from 25 to 33 transactions, driven solely by foreign investors; the number of deals with Norwegian buyers decreased to 14 in Q4 compared to 15 in Q3. It should also be noted that a significant share of the deals, 67% or 22 out of 33 deals in total, involved listed companies. This is the highest share in the history of Transaction Trends with the exception of Q1 2013, where the share was 68% (17 of 25 deals in total). Although the average deal size has declined from its record high in the previous quarter, the number of deals valued over USD 100m has seen an increase. This is connected with a notable share of the targets being public companies, which are often larger by nature. Note that part of the decline in average deal size, denominated in USD, is also driven by a strong depreciation of the NOK in Q4, as NOK is the denomination currency for a significant share of the transactions covered in this newsletter. Deal value by range (est.) USD 0-100 m Source: Mergermarket & EY 22 > USD 100 m Target Region Source: Mergermarket Q4 2014 LTM 14% 15% 9% 64% 5% 1% 4% Norway Americas Nordics (excl. Norway) Asia-Pacific Europe (excl. Nordics) Other Averagedeal dealsize size(est.) (est.) Average Source:Mergermarket Mergermarket&&EY EY Source: Dealvalue value(USDm) (USDm) Deal 949 949 16 10 18 15 496 496 9 268 268 Q114 62% 9% 0% 21 12 15% 3% Q214 Q314 Q414 Q114 Q114 336 336 Q214 Q214 Q314 Q314 Transaction TransactionArena Arena Source: Mergermarket Source: Mergermarket 2008 - 2014 2008 - 2014 LTM LTM Q42014 2014 Q4 4 | Transaction Trends 1st edition 2015 Public Public Private Private 56% 56% 44%44% 59% 59% 67% 67% 41%41% 33%33% Q414 Q414 Public Market Update With five new listings in the fourth quarter, all on Oslo Stock Exchange, 2014 finished off as the best year for IPOs in Norway since 2010, and the best year for listings on Oslo Stock Exchange since 2007. Scatec Solar ASA, XXL ASA, and Entra ASA listed in October, whereas RAK Petroleum plc and RenoNorden ASA listed in November and December, respectively. One of the most high-profiled IPO of the quarter was EQT’s listing of XXL, which completed the initial public offering with a share price of NOK 58, valuing the company at NOK 8bn, or about USD 1.1bn. Bookbuilding was completed four days prior to the original estimated closing day following a heavy over-subscription. After the IPO, EQT remains one of the main owners with 28% of the shares. New listings Source: Oslo Stock Exchange 24 16 16 8 8 10 4 0 Private Public Employee 33.749 30.000 20.000 25.093 17.326 18.245 13.182 10 2009 2010 9 2011 2009 2010 2011 2012 2013 OBX Index 2012 2013 2014 IPO Private Public 4.000 Employee 3.000 2.440 2.228 1.810 1.810 1.228 4% 0 5% 2008 2009 1.150 2010 2011 2012 2013 4,4 3,8 3,5 4,4 4,5 EV/EBITDA 500 400 P/B 300 2014 2013 2012 1,5 1,5 1,5 1,7 1,7 2011 2010 200 P/E 100 0 2012 2014 Source: S&P Capital IQ 600 5 2014 Avg. OBX multiples Source: S&P Capital IQ 2011 7 4 5.115 1.000 2008 7 1 5.000 2.000 10.000 0 4% 5% 3 0 3 8 6.000 IPO 40.000 12 NOKm 50.813 50.000 12 4 Source: Oslo Stock Exchange 59.709 60.000 13 Issues by value, Oslo Axess Source: Oslo Stock Exchange NOKm 11 6 12 2008 Issues by value, Oslo Stock Exchange Oslo Stock Exchange 19 Oslo Axess 21 20 2013 | Transaction Trends 1st edition 2015 2014 7,3 9,0 8,4 9,3 10,6 Capital Confidence Barometer Middle-market deals to fuel M&A rebound globally In October 2014, EY published its 11th edition of Capital Confidence Barometer (“CCB”), a semi-annual survey gauging corporate confidence in the economic outlook and trends in how companies manage their Capital Agenda. The 1,600 respondents – representing 62 countries and 18 sectors - predict healthy growth for M&A globally, which should take the market back to pre-crisis levels. After a period with a high number of mega deals, focusing on optimization and core will fuel more middle-market deals in the upcoming year. The biggest indicator of positive deal sentiment is pipeline, which has increased by 30% since April, and additionally, two thirds of executives expect pipelines to expand further over the next 12 months. Macroeconomic environment Despite a continuation of disruptive external influences, greater confidence in global economic stability lays the foundation for future M&A. The number of executives that view the global economy as stable has almost doubled in the past 12 months, and the same is true for the level of confidence in corporate earnings, where the confidence score increased from 43% to 77% from October 2013 to October 2014. Confidence has also boosted in all other measures compared to both April 2014 and October 2013, including short-term market stability (64%), credit availability (58%), and equity valuations/stock market outlook (54%). What is your perspective on the state of the global economy today? 53% Improving Stable 24% 3% Declining 31% 60% 65% 44% 9% 11% Corporate Strategy Oct-14 Apr-14 Oct-13 In line with their growing confidence in global economic stability, more companies are expanding their core business by changing their mix of products and services and increasing product introductions; our survey shows a threefold increase in the number of companies adopting both of these strategies. The growth focus is tempered by a disciplined approach to cost reduction and operational efficiency, as executives remain mindful over lessons 6 | Transaction Trends 1st edition 2015 Expectations to pursue an acquisition 50% 40% 35% 40% 29% 30% 31% 25% 20% 10% okt.12 apr.13 okt.13 apr.14 okt.14 learned during the financial crisis. A negligeable share of companies are preoccupied with survival. M&A outlook Companies’ appetite to do M&A is at a three-year high, with 40% of executives expecting to pursue acquisitions the next 12 months. This is a clear signal of intent to look at deals as a route to growth. Despite the high appetite, dealmaking challenges still persist; just under half of executives (44%) are confident in the likelihood of closing acquisitions, which may be due to increasing rigor in search of strategically aligned assets, more thorough due diligence, or greater competition. Executives see an accelerating M&A market in the near term, with almost two thirds expecting deal volume to increase further in the next 12 months – even after a relatively positive 2014 for M&A. 2014 saw a rise in multibillion dollar deals, which are having a significant ripple effect on the remaining M&A market, which has seen increased confidence and triggered transaction activity further down the deal chain. With the appetite to acquire at its highest for three years, we now expect a new wave of M&A globally, with much more focus on mid-market size deals. The new middlemarket momentum should lift M&A activity as companies seek to strengthen and expand their core business. The majority of deals swelling pipelines globally are focused on strengthening the core business, by boosting market share, managing costs, and improving margin growth. What is the maximum single deal value expected over the next 12 months? okt.14 apr.14 okt.13 50% 23% 31% 30% 27% 20% 31% 10% 4%5% 15% 23% 12% 14% Less than $50m $50m – $249.9m $250m – $499.9m Greater than $1b $500m – $999.9m 5% The climate remains favorable for large acquisitions, however, the growth of M&A should be defined by the major shift in focus towards deals valued at USD 250m and lower, and with more focus on the core sectors. The number of companies that have more than five deals in pipeline has increased significantly, from 15% in April to 23% in October. The number of deals being considered by our respondents has also substantially increased, with the aggregate up by 30% since April 2014. A further sign of growing momentum is that almost two thirds, or 66%, expect M&A pipelines to expand further over the next year – more than double the number expecting increases six months ago. In addition to more transactions in pipeline and expectations of an increase in these, a modest valuation gap among our survey respondents and confidence in asset prices further underpin positive deal sentiments. Half of executives think the valuation gap is less than 10%; the number of respondents considering the valuation gap higher that 25% is down to only 7%. 74% of executives also expect the valuation gap to remain unchanged in the next 12 months, and these factors combined will further encourage dealmaking in the near term. M&A plans center on boosting core, as the majority of companies are focusing on acquiring businesses in their core sectors (73%), with an eye to boosting market share, managing costs, and improving margin growth. 63% of respondents reported that their planned M&A activity will mostly be bolt-on acquisitions, and over one third of respondents have indicated that access to new technology or intellectual property is one of their main three drivers impacting their company’s M&A strategy. Leverage has declined since the global financial crisis, mainly explained by increases in equity value. According to the S&P Global Broad Market Index, the value of average market capitalization has increased by 60% since October 2009, whereas total debt rose by 19% only. Nearly half of executives expect their companies’ debt-to-capital ratios to increase over the next 12 months, indicating a willingness to take on more debt to fund growth ambitions. The 11th CCB survey clearly points out optimism among the world’s top executives. With strong pipelines, acquisition appetite at a three-year high, solid balance sheets, and low valuation gaps, the momentum of 2014 M&A is expected to continue on in the near future, however, with a shift towards middle-market driven rather than mega deal driven market. After years of contraction and stagnation, global deal activity looks set to return to pre-crisis levels. To read the full Capital Confidence Barometer report, please click here. On which of the following capital management issues is your company placing the greatest attention and resources today? okt.14 33% apr.14 23% 52% The Capital Agenda 66% Increase 29% okt.14 29% No change 62% 5% 9% Oct-14 Apr-14 7 15% okt.13 14% How do you expect your deal pipeline to change over the next 12 months? Decrease apr.14 28% okt.13 okt.14 | Transaction Trends 1st edition 2015 0% okt.14 apr.14 3% apr.14 okt.13 5% okt.13 52% 46% 29% EY Services- -Norway NorwayContacts Contacts EYTransaction Transaction Advisory Advisory Services Vegard Stevning Head of Transaction Advisory Services, Transaction Support [email protected] +47 916 83 692 Oslo [email protected] +47 917 97 625 Oslo [email protected] +47 970 25 021 Oslo [email protected] +47 905 66 778 Oslo [email protected] +47 982 06 499 Bergen [email protected] +47 971 66 567 Oslo Paul M. Larsen Transaction Support Bjørn Tore Foss Transaction Support Erik Haagensen Transaction Support Merete Skage Transaction Support Nils Kristian Bø Valuation & Business Modeling Bjarne Møller Valuation & Business Modeling [email protected] +47 917 86 481 Bergen [email protected] +47 982 06 678 Stavanger [email protected] +47 928 02 095 Stavanger [email protected] +47 971 16 869 Oslo [email protected] +47 913 47 741 Oslo [email protected] +47 917 86 479 Oslo [email protected] +47 954 52 441 Oslo Kjell Stenersen Corporate Finance Espen Norheim Corporate Finance Ole Conrad Siem Corporate Finance EY | Assurance | Tax | Transactions | Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com. Helge Fredheim Operational Transactions Services Henning Raa Transaction Tax Hanne Fritzsønn Transaction Tax About this publication Transaction Trends is a quarterly publication that aims to identify trends in the Norwegian transactions market. Transactions covered in this publication are public and private transactions announced by the 500 largest Norwegian companies (DN500), defined as a transaction where either the buyer, target or vendor company is a Norwegian based company. Public transactions are defined as transactions where either the buyer, target or vendor company is listed on a public stock exchange. All other transactions have been classified as private. Domestic transactions are defined as transactions conducted within a national boundary, i.e. deals involving two or more incumbent nationals, while cross border transactions involve companies from at least two different nationalities. Deal Value is taken as the sum of the consideration paid by the acquirer for the equity stake in the target plus the value of the net debt in the target, where applicable. Inclusion of net debt in the deal value will depend on the stake acquired or the target company type. Transaction Statistics are based on mergermarket/EY data. Public market data are sourced from S&P Capital IQ and Oslo Stock Exchange. Transaction Trends is published by EY Transaction Advisory Services. For further enquiries, or to add your name to the mailing list for this publication, please send an e-mail to [email protected]. Contact information Bjørn Tore Foss Tel.: +47 970 25 021 E-mail: [email protected] © 2015 EYGM Limited. All Rights Reserved. This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for specific advice. ey.com