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Challenges facing M&A in2010
PierpaoloMaio
Amsterdam,20/21May2010
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I hear and I forgetI see and I rememberI do and I understand
(Confucius)
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Whatsupintheworld?(1)
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Whatsupintheworld?(2)
Liquidityinexcess(bail-outofprivate/publiccompaniesandofenGrecountries)
LowInterestrates(centralbankswillconGnuetokeeptheseaslowaspossible) PoliGcalissues(EuropeinparGcular)Sovereigndebt(themotherofallthebubbles?)
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Liquidityinexcess
(bail-outof
private/publiccompaniesand
ofenGre
countries)
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LowInterestrates
(CentralBanks
willconGnuetokeepthese
aslowas
possible)
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Source:TheEconomist
Poli;calissues(Europein
parGcular)
andSovereign
debt(the
motherofallbubbles?)
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theaQermathoffinancialcrisestendstobe
nasty,bruGshandlong.
Thatis,financialcrisesaretypicallyfollowedbydeep
recessions,andthese
recessionsarefollowedby
slow,disappoinGng
recoveries.
[PaulKrugman]
Consequencesofthecrisis
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Consequencesofthecrisis
Therecentfinancialcrisishascreatedunexpected
strategicopportuniGesfor
mergersandacquisiGonsfor
companieswithstrongcash
posiGonsthatareprepared
toactandquicklysince
thisopeningcouldcloseas
signsofarecovering
economybecomemore
evident
[MarkL.Sirower,RobertL.Grossman
andVirendraPalande]
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Healthyconsequencesof
thecrisis MoreefficientreallocaGonoftheassets
Fasterwaytogrow Sinergywiththecompanyacquired(verGcalintegraGon,
increaseduGlizaGonofproducGon
technology,taxsavings)
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Newlegisla;onswillhelpM&AinEuropean
insurancesectorduringnextyears
BaselIIisasetofrecommendaGonsonbankinglawsandregulaGonsissuedbytheBaselCommi[eeonBankingSupervision.ThepurposeofBaselII,whichwasiniGallypublishedinJune2004,is
tocreateaninternaGonalstandardthatbankingregulatorscanusewhencreaGngregulaGonsabouthowmuchcapitalbanksneedto
putasidetoguardagainstthetypesoffinancialandoperaGonal
risksbanksface.AdvocatesofBaselIIbelievethatsuchaninternaGonalstandardcanhelpprotecttheinternaGonalfinancial
systemfromthetypesofproblemsthatmightariseshouldamajor
bankoraseriesofbankscollapse.InpracGce,BaselIIa[emptsto
accomplishthisbyse_nguprigorousriskandcapitalmanagement
requirementsdesignedtoensurethatabankholdscapitalreservesappropriatetotheriskthebankexposesitselftothroughitslending
andinvestmentpracGces.enerallyspeaking,theserulesmeanthatthegreaterrisktowhichthebankisexposed,thegreaterthe
amountofcapitalthebankneedstoholdtosafeguard
itssolvencyandoveralleconomicstability.
SolvencyIIisasetofregulatoryrequirementsforinsurancefirmsthatoperateintheEU.Itisscheduledtocomeintoeffectlate2012.
TheraGonaleforEUinsurancelegislaGonistofacilitatethedevelopmentofaSingleMarketininsuranceservicesinEurope,
whilstatthesameGmesecuringanadequatelevelofconsumerprotecGon.Thethird-generaGonInsuranceDirecGvesestablishedan
"EUpassport"(singlelicence)forinsurersbasedontheconceptof
minimumharmonisaGonandmutualrecogniGon.
BaselII
SolvencyII
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MAINSECTORS:
Content/entertainmentCommunicaGonsPharma
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Pharma
Merck/Schering:value$41Billion
Pfizer/Wyeth:value$68Billion
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Creative industries
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CleanEnergy
Wind:NorthAmericaandAsiasettogrowdramaGcally
Solar:two-folddynamic(technologyprovidersand
upstreamplayers)
Smartrid:giantsarejumpingin(Cisco,IBM,ABB,E)
TrendsinM&A
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EUROPE April2010,theworstmonthinM&AinEuropeinmorethandecade
Only15%oftheglobaltotalvalueofthedeals
Intheperiodfrom2005toMarch2010,theaveragemonthlyproporGonoftotalM&Abyvalue
representedbyEuropehasbeen
36%
UK,theonlycountrywithsignsofrecoveryinbuyouts(foravalueof
5Billioninfirstquartervs5.9
Billionin2009)
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