Printer Friendly

CROSS-BORDER M&A JUMPS FIFTY PERCENT IN SECOND QUARTER OF 1992

 CROSS-BORDER M&A JUMPS FIFTY PERCENT IN SECOND QUARTER OF 1992
 CHICAGO, Ill., July 20 /PRNewswire/ -- Cross-border acquisitions in the second quarter of 1992 were 50 percent higher than the previous quarter according to KPMG, the international accountants and consultants. KPMG's quarterly M&A statistics recorded worldwide cross- border acquisitions valued at $21.5 billion in the second quarter of 1992, compared with $14.3 billion in the first three months of the year. Measured in terms of the corresponding period in 1991, when cross-border acquisition activity amounted to $15 billion, the second quarter's activity was 43 percent higher.
 The second quarter's figures also contributed to the 45 percent increase in cross-border M&A in the first six months of 1992 compared with the same period in 1991, according to KPMG. $35.8 billion of cross-border acquisitions were agreed in the first half of 1992 compared with $24.6 billion in the first half of 1991.
 The two largest deals announced in the first half of 1992 involving U.S. companies were:
 Bidder Target Industry $Million
 Asahi Glass (Japan) AFG Industries (USA) Glass manufacture 1,100
 Solvay (Belgium) Tenneco's Wyoming Soda ash
 minerals operation (USA) manufacture 500
 "These figures are further evidence that the cross-border M&A market has stabilized and is recovering from the depressed conditions of 1991," commented Lenz Neuhauser, KPMG's National M&A director in Chicago. But the level of activity is still much lower than before the Gulf crisis and the recession that several of the leading M&A economies have been experiencing, according to KPMG. The quarterly average value of cross- border transactions in 1992 is $17.9 billion, compared with $29.5 billion in 1990 and $32.6 billion in 1989.
 The number of cross-border acquisitions recorded by KPMG in the first six months of 1992 was 905, compared with 1,001 deals recorded in the same period in 1991.
 North America Buying and Selling Down
 Canadian and American buyers went against the trend, reducing their cross-border acquisitions in the first half of 1992. Canadian buyers made 37 cross-border purchases for $495 million (first half 1991; 34 deals, $826 million) and American buyers made 157 cross-border purchases for $4.1 billion (first half 1991: 172 deals, $3.3 billion). "Both countries have experienced long-lasting recessions, and current forecasts are of a small-scale recovery at best," said Neuhauser. "In such circumstances companies tend to focus on survival rather than overseas expansion."
 The weak North American economy might be thought to encourage predatory buyers looking for forced sales at bargain prices. KPMG's statistics show that instead, foreign buyers are reducing their purchases in North America. While Canadian sales to foreign buyers rose from $609 million in 52 deals in the first half of 1991 to $1 billion (47 deals) in the same period in 1992, American sales dropped from $7.5 billion (213 deals) to $6.8 billion (141 deals) over the same periods.
 "It is not a lack of long-term confidence in the North American economy that is holding back investment in Canada and the USA," said KPMG's Neuhauser. "Instead, the realization that the recovery will be slow and that pressure on business will be long-lasting is slowing down investment, including foreign acquisitions in North America. The one thing that would give a boost to trade, and thus to confidence levels, would be for the Uruguay round of the General Agreement on Tariffs and Trade (GATT) to be concluded successfully."
 Contested Cross-Border Bids and the EC
 Contested bids returned to the cross-border market in the first half of 1992, when two of the ten largest deals involved rival bidders. The role of the EC's competition policy in determining the outcome of cross- border bids was also a feature of activity in the first six months of 1992.
 In the largest cross-border acquisition of the period, Hongkong & Shanghai Bank beat Lloyds Bank (UK) to acquire the UK's Midland Bank for more than $5 billion. The other major contested bid was in the food and drink sector, currently one of the most active in Europe. In competition with the Italian Agnelli family, the Swiss group Nestle was successful in its $2.8 billion bid for the French mineral water company Perrier but is waiting for the European Commission's decision on whether or not the deal can go ahead.
 The EC's objections to the Nestle/Perrier deal illustrate the growing role that the commission's competition policy is playing in determining the outcome of bids. In the first move of its type, the EC is examining whether or not the deal would create a duopoly in a national market, in this case the French mineral water market, where the other major producer is the French food group BSN.
 Three Cross-Border Privatizations in Top Ten
 Privatizations offer cross-border investors an increasing number of investment opportunities, according to KPMG. Three of the ten largest deals in the first half of 1992 were cross-border privatizations: Elf Aquitaine's $3.1 billion purchase of the east German petrol filling station chain Minol; Fiat's $2 billion purchase of the Polish automobile manufacturer FSM; and Ferruzzi's $647 million acquisition of Heracles General Cement in Greece.
 East Europe continues to be a major source of privatizations. The three most economically advanced eastern European countries, Czechoslovakia, Hungary and Poland, were responsible for 39 cross-border privatizations valued at $2.8 billion in the first half of 1992 (first half 1991: 29 cross-border privatizations, $151 million). "Privatization sales to western investors are bringing benefits to the sellers by introducing capital, technology, and management expertise to eastern Europe," commented KPMG's Neuhauser. "For western businesses, the benefits that are now being realized include access to highly educated work forces with much lower employment costs than their counterparts in western Europe. Two factors behind the increase in cross-border deals are the growing expertise of the privatizations agencies in securing a deal that meets their objectives, and the increased experience of western businessmen and their advisers in doing business in eastern Europe."
 The liberalization of the Latin American economies will also result in more cross-border privatizations, according to Neuhauser. "The market has been quieter than two years ago when the $5.2 billion privatization of the Argentinian telephone company Entel involved consortia of European telecommunications companies and American banks," he said. "But the Latin American governments are still bringing forward privatization candidates in a wide range of industrial sectors, and as a group have shown themselves to be open to foreign investment, even in strategic industries such as telecommunications and airlines."
 Market Corrects High Prices Paid Earlier
 In a sign of the times, some high-priced deals from previous years returned to the cross-border market at much lower prices. The Pebble Beach golf resort in the United States was acquired in 1992 for $500 million by a consortium including the Japanese golf club Taheiyo, the second time in two years that a Japanese buyer had acquired it. But in 1990, when the Japanese businessman Minoru Isutani bought it, he paid $825 million. His plans to turn the courses and hotels, originally open to the public, into an exclusive club proved impossible to realize, and the re-sale price reflected the changed financial climate in Japan.
 European M&A Increases
 The major part of the increase in cross-border M&A in the first half of 1992 was in the European Community, where cross-border sales of EC companies amounted to $21.7 billion, 66 percent higher than the $13 billion recorded by KPMG in the same period in 1991. Cross-border sales of EC companies accounted for 61 percent of all cross-border activity in the first six months of 1992.
 "The single European market is gradually becoming a reality. Businesses are restructuring, particularly through M&A, to ensure that they are organized to operate in a pan-European market rather than a national market," said KPMG's Neuhauser. "But the restructuring is not over yet and there are opportunities for strategic buyers at every level, including the middle market (deals up to $100 million). Confidence levels are relatively high, which will encourage potential sellers to bring good companies to the market. Now that we are seeing an upward trend to the statistics, I believe that conditions in Europe are improving and that buyers should explore the European market sooner, rather than later."
 -0- 7/20/92
 /CONTACT: Mary Eichhorn of KPMG Peat Marwick, 312-938-3224/ CO: KPMG Peat Marwick ST: Illinois IN: FIN SU: ECO


TQ-KO -- NY041 -- 0772 07/20/92 13:07 EDT
COPYRIGHT 1992 PR Newswire Association LLC
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1992 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Publication:PR Newswire
Date:Jul 20, 1992
Words:1412
Previous Article:NORTHERN TRUST REPORTS RECORD NET INCOME FOR THE SECOND QUARTER AND FIRST SIX MONTHS OF 1992
Next Article:PREMARK EARNINGS RISE ON STRENGTH IN FOOD EQUIPMENT
Topics:


Related Articles
VALUE OF CROSS-BORDER DEALS SOARS 45 PERCENT; INVESTORS TARGET DEVELOPING MARKETS
NORTH EUROPEAN OIL ROYALTY TRUST REPORTS REVENUES
CROSS-BORDER M&A JUMPS FIFTY PERCENT IN SECOND QUARTER OF 1992
CITICORP REPORTS SECOND-QUARTER PROFIT AND FURTHER PROGRESS TOWARD PLAN GOALS
ON THE BORDER CAFES ANNOUNCES RESULTS
CITICORP REPORTS SECOND-QUARTER PROFIT AND FURTHER PROGRESS TOWARD PLAN GOALS
CURRENCY AND STOCK MARKET TURMOIL LEADS TO DECLINE IN CROSS-BORDER M&A
WORLDWIDE ACQUISITIONS JUMP 30 PERCENT IN 1992: U.S. INVESTORS EMERGE AS MOST ACTIVE BUYERS, OUTSPENDING THE EUROPEANS AND JAPANESE
CROSS-BORDER M&A FALLS IN FIRST QUARTER OF 1993
ON THE BORDER CAFES, INC. REPORTS SECOND QUARTER OPERATING RESULTS

Terms of use | Copyright © 2016 Farlex, Inc. | Feedback | For webmasters