PE-backed activity boosts regional, global M&As

After more than tripling in value in Q1 2010 over the corresponding quarter in 2009, regional mergers and acquisition activity is cruising in the second quarter thanks to big-ticket private equity-backed buyouts.

According to Mergermarket data, regional M&As ended the first quarter of 2010 at $3.95 billion (Dh14.5bn), up 277 per cent from $1.05bn in the corresponding period of 2009, and the month of April witnessed 14 deals worth $541m.

The latest deal – awaiting approvals – involves the US-based investment firm TPG Capital's $1.3bn buyout of Charlotte-based American Tire Distributors Holding from the Bahrain-based alternative investment firm Investcorp. According to a statement issued by American Tire, the company had planned a public stock offering, which was suspended because of the buyout announcement.

The value of worldwide M&As for year-to-date 2010 totals $696bn, a 19 per cent increase over year-to-date 2009, according to Thomson Reuters data. However, PE-backed M&As have more than doubled for the same period.

Globally, the energy and power (13 per cent) and financials (12 per cent) sectors account for a quarter of all PE-backed M&A deals year-to-date.

According to Thomson Reuters, with $141bn in mergers announced during the month, April marks the slowest month for worldwide M&A activity since August 2009.

European target M&A is down 36 per cent during 2010, with $125.3bn in announced M&A volume. In fact, European M&A comparisons are affected by large government investments in RBS and Lloyds during the first quarter of 2009.

Excluding government investments, European M&A is actually up 20 per cent over 2009.

Buyouts led by PE firms or PE portfolio companies total $39.9bn for year-to-date 2010, more than double the activity seen during year-to-date 2009. The percentage of buy-side financial sponsor and sell-side financial sponsor transactions is at near parity during the second quarter, compared to the imbalance seen during the height of the M&A boom when PE buyers outweighed sellers by a ratio of 3:1.

Global buyout fundraising totalled $18.1bn during the first quarter of 2010, a 46 per cent decrease from the first quarter of 2009, but a 35 per cent increase from the fourth quarter of 2009.

PE fundraising peaked during the first quartet of 2008, when global firms raised a massive $129bn to make acquisitions.

Year-to-date IPO activity totals $63bn, the best start of the year since the first four months of 2007.

Issuers from Asia Pacific are the most active for IPOs this month accounting for 68 per cent of the global market. This marks the most active start to the year for this region since 2000.