2014 proved a record year in terms of mergers and acquisitions (M&A) activity, according to data from Deloitte.
The firm stated that high M&A deal values made an emphatic return in 2014, particularly in the healthcare, TMT and consumer products sectors. In the first three quarters of 2014, companies spent US$2.5 trillion (€2.1 trillion) on M&A activities, making 2014 the best year for deals since 2007.
“The high value of deals will remain in 2015, with a cautious but steady pick-up. In 2015 I would expect to see these sectors continue to perform well, but in addition to more activity in the mining and resources sector, with speciality finance also being one to watch. By geography, the faster pace of recovery in the US over Europe will also deliver more trans-Atlantic interest in the industrial and manufacturing services,” said Paul Lupton, Head of Advisory Corporate Finance for Deloitte.
Consumer product M&A activity also saw increased activity levels in 2014. According to Deloitte, Emperado’s acquisition of Whyte & Mackay and, more recently, Yildiz’s acquisition of United Biscuits signalled the welcome return of overseas buyers making major investments in the European market. Benign credit conditions, large corporate war-chests and increased US buyer interest in Europe also point to an increase in activity levels.
Conor Cahill, Corporate Finance Partner at Deloitte, said that a number of major corporates are now re-aligning their brand portfolios and divesting non-core assets, with Reckitt Benckiser’s divestment of Ribena/Lucozade and Unilever’s disposal of its Ragu and Bertolli businesses as examples of this.
“Looking ahead, despite the easing of general commodity prices, consumer product companies continue to face pricing pressure as the intense competition between discounters and larger retailers persists. The ability to demonstrate innovation and investment will remain critical for branded goods producers to differentiate themselves from their private label counterparts,” said Mr. Cahill.
Private equity fundraising remained strong in 2014, although capital was concentrated among fewer funds, according to Preqin.
According to Preqin, 977 private equity funds held a final close throughout the year raising a total of $486 billion (€410 billion), higher than any annual amount between 2009 and 2012, and on track to match the 2013 total, as at mid-December.
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However, the $486 billion (€410 billion) in capital commitments was spread between the lowest number of funds in any year since 2009.
The amount of capital raised is on track to match the amount of capital raised in 2013 ($531 billion / €446 billion), as Preqin expects the 2014 fundraising figure to increase by 10-20% as more information becomes available.
For the funds that did close, the average time to reach a final close fell by two months; funds that closed in 2014 took an average of 16 months, compared to 18 months for funds closed in 2013.
There was increased fundraising success in 2014, with 52% of funds closed above their fundraising target, while a further 17% met their fundraising target. This compares to 47% of closed in 2013 funds which exceeded their target.
First-time funds closed in 2014 accounted for 7% of total capital secured by funds over the year, the same proportion as in 2013.
The largest fund to close in 2014 was buyout fund Hellman & Friedman VIII, which held a final close on $10.9 billion (€9.15 billion).
According to Preqin, investor sentiment towards the asset class remains very positive with almost half of the investors surveyed by Preqin in December expect to make their next private equity fund commitment in the first half of 2015.
