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Cross-Border M&A Hits Post-Crisis High

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Cross-Border M&A Hits Post-Crisis High

New report reveals that 86% view their last cross-border deal as successful and over a third plan new international deals in the next two years

A new report from FT Remark and Baker & McKenzie reveals a post-crisis high in cross-border M&A deal values. In the first three months of 2014, there were 1,087 international deals worth a total of $263.1bn, according to data from Mergermarket.

The report also indicates that companies are making an extra push to achieve global presence, with 599 deals worth $184.4bn spanning across two different regions in the first quarter of 2014 - the highest value for six years.

Companies are overwhelmingly positive about their cross-border dealings, with 86% of respondents surveyed rating their most recent transaction a success. As a reflection of this, the report also shows that over a third of respondents (34%) plan to undertake further cross-border transactions over the next two years.

"Cross-border M&A remains a highly effective tool in the implementation of business strategies."

Europe was the most prominent target market for dealmakers looking outside their home markets in 2013, with 38% of transactions by value taking place in the region. By contrast, North America, which saw the same amount of inbound M&A spending as Europe in 2012, was the target of only one in four deals last year. Africa saw the most rapid increase in appetite among dealmakers, with the share of global M&A activity rising from 4% to 7%.

"The healthy flow of large M&A deals seems to be the main theme of 2014," says Giovanni Amodeo, Global Editor in Chief for Mergermarket. "While in 2013 we saw a booming February with four large transactions which were not followed by a busy remaining part of the year, this year companies across the sectors and regions are continuously on the look out to take advantage of their cash positions to make large deals. Particularly active is the pharmaceutical sector which has not seen more than three transactions above $5bn since 2006. This year we have seen eight such transactions, six of which involve two different regions," Amodeo said.

The report also exclusively ranks the five principal strategic motivations behind cross-border acquisitions:

  1. Building scale through the acquisition of customers or distribution networks. This raises particular issues around the credibility of revenue streams, antitrust and competition, and the complex process of retaining customers post acquisition.
  2. Acquiring intellectual property. Such deals can frequently raise challenges related to ownership, data and brand protection and the need to rationalize and consolidate structures and asset ownership in the post-merger phase.
  3. Adding skills and capabilities through the acquisition of human capital. This often requires careful planning to address complex cultural and political considerations, as well as the development of policies and incentive programs to retain staff.
  4. Gaining access to natural resources. Almost invariably, such transactions raise questions of politics, regulation/controls, and social and environmental impact.
  5. Building a company's strength through the purchase of industrial assets. This is often associated with complex tax, human resources and compliance issues.

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Tim Gee, Global Head of M&A at Baker & McKenzie commented that "powerful macroeconomic and political forces continue to provide impetus to globalization, and companies around the world are driven by their strategies to move into new markets and jurisdictions. In the vast majority of instances these moves are positive. Of the 350 companies interviewed as part of the research for this report, 86% said that their most recent cross-border M&A transaction was a success. Cross-border M&A remains a highly effective tool in the implementation of business strategies."



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