M&A appetite strong in CEE/SEE, say dealmakers

BY Fraser Tennant

Mergers & acquisitions (M&A) activity in Central, Eastern and South-Eastern Europe (CEE/SEE) is strong, with 98 percent of dealmakers in the region indicating they will continue to invest in the market, according to a new report from Mergermarket and Wolf Theiss.

The ‘Corporate Monitor’ report, which canvassed the opinions of 150 senior-level executives about their experiences and outlook on M&A in the CEE/SEE region, also includes in-depth analysis of macroeconomic developments and M&A trends in each CEE/SEE country.

The report found that M&A activity in CEE was lively in 2016 amid global economic uncertainty, with deal value reaching €38.3bn, up 62 percent from €23.6bn in 2015. Furthermore, in line with global trends, deal volume remained fairly even year-on-year, with 507 deals compared to 516 in 2015.

Additionally, the report found that: (i) Poland, Austria and the Czech Republic are seen as the most attractive markets for buyers; (ii) the leading driver for M&A in the region is a target’s intellectual property or technology suggesting that CEE is developing strong innovation; (iii) the main challenge for dealmakers in specific countries stems from the competitive bidding environment according to 51 of senior-level executives; and (iv) investors expect distressed opportunities to grow in 2017, which should be of particular interest to buyout firms.

“Firm GDP growth in most CEE countries has sparked investor confidence in the region,” says Sonja Caymaz, research editor at Remark, part of the Mergermarket Group. “There was strong appetite for TMT, real estate, consumer and energy targets, especially from private equity (PE) firms which led to a record value for PE deals in 2016 (103 deals worth a combined value of €11.3bn – the highest deal value for PE in the region ever recorded by Mergermarket). There is still plenty of room for digitalisation in consumer and manufacturing businesses, and the ability to grow strong local brands across borders. As elsewhere in Europe, inbound activity from China into the CEE region also doubled compared from 2015.”

Horst Ebhardt, head of the corporate and M&A group at Wolf Theiss, concluded: “CEE/SEE saw a very strong M&A market in 2016 and this trend is widely expected to continue in 2017 – despite uncertainty in assessing the policy approaches of the new US administration, the outcome of elections in France and Germany and the UK’s structuring of its exit from the European Union.”

Report: M&A SPOTLIGHT: CEE - WOLF THEISS Corporate Monitor FY 2016

Millennials key to worldwide cyber security workforce shortage, says new study

BY Fraser Tennant

A severe shortage of talent in the information security workforce is looming, with employers needing to look to millennials to fill the gap, according to new research from the Center for Cyber Safety and Education, published this week.

The research, part of the Centre’s eighth Global Information Security Workforce Study (GISWS), which includes feedback from over 19,000 information security professionals worldwide, indicates that employers must look to millennials to fill the projected 1.8 million information security workforce gap that is estimated to exist by 2022. This is a 20 percent rise from the 1.5 million worker shortfall forecast by the GISWS in 2015.

The publication of the GISWS coincides with a major initiative to tackle the UK skills deficit due to a lack of millennials recruited into the field: the National Cyber Security Centre, which was officially opened this week in London.

"Supporting and developing the next generation of cyber security talent is essential to the future of the industry,” said Richard Horne, cyber security partner at PwC. “We are on track to recruit more than 1000 technology specialists over the next four years at both graduate and experienced levels. It is important to help graduates experience the many different paths a career in this field could follow by offering a rotation programme around our teams, ranging from threat intelligence and incident detection and response to security transformation programmes and legal and regulatory compliance.”

The 2017 GISWS features a series of reports and analyses focusing on millennial respondents, with key takeaways for employers and hiring managers as to how they should go about attracting and retaining the millennial workforce. These include: (i) millennials value career development opportunities and are more likely to pay for them, if not offered by their employers; (ii) they are more likely to aspire to become security consultants than move into managerial roles within an organisation; and (iii) salaries were not the highest priority for millennials, but they do receive higher salary increases than other generations.

Mr Horne continued: “Cyber security roles can often be seen as purely technical but today's well-rounded cyber security expert has a diverse skillset, with not only technical knowledge but also wider business skills like creativity, organisation, relationship-building and communication."

With addressing the impending information security workforce shortage clearly a major concern, David Shearer, chief executive of the Center for Cyber Safety and Education, is confident that millennials “are the future of cyber security and hold the key to filling the information security workforce gap".

Report: Meet the Millennials – the Next Generation of your Information Security Workforce

Reckitt Benckiser to acquire Mead Johnson for $16.6bn

BY Richard Summerfield

The world’s leading consumer health and hygiene firm, Reckitt Benckiser Group plc, has announced that it is to acquire Mead Johnson Nutrition Company for around $16.6bn, though the total value of the deal, including the target's existing debt, will be around $17.9bn.

Mead's shareholders will receive $90 cash per share held, a premium of 9 percent to the company's closing price of $69.50 on 1 February 2017, the day before speculation of a possible deal first emerged, and 24 percent up on its 30-day volume-weighted average price of $72.37.

In a statement announcing the deal Rakesh Kapoor, Reckitt's chief executive, said: “The acquisition of Mead Johnson is a significant step forward in RB’s journey as a leader in consumer health. With the Enfa family of brands, the world’s leading franchise in infant and children’s nutrition, we will provide families with vital nutritional support. This is a natural extension to RB’s consumer health portfolio of Powerbrands which are already trusted by millions of mothers, reinforcing the importance of health and hygiene for their families.”

According to the firms, the newly combined company will generate around 40 percent of its sales in developing markets. China will be the firm’s second-largest market after the US. The takeover will add to Reckitt's earnings within a year of the deal completing and the deal will generate $250m of cost savings after three years.

James Cornelius, chairman of Mead's board of directors, said: “The agreement being announced today is about value creation. First and foremost, this transaction provides tremendous value to Mead Johnson Nutrition stockholders. Additionally, relative to the future growth and development of the Mead Johnson business, Reckitt Benckiser – with its strong financial base, broad global footprint, consumer branding expertise and dynamic business model – is an ideal partner.”

Reckitt has confirmed that the deal will be funded through a combination of cash and new debt. To complete the deal, the company will take out a bridging loan of $8bn to cover the cash consideration and issue $9bn of new debt in the form of three- to five-year-term loans.

The two companies have also noted that the deal will include a $480m break-fee if either company walks away, subject to certain conditions.

News: Reckitt Benckiser to buy Mead Johnson

Automotive industry faces crunch as production set to nosedive in Western Europe, survey reveals

BY James Williams

Automotive production in Western Europe will be less than 5 percent by 2030, according to KPMG’s ‘Global Automotive Executive Survey 2017’ – its annual state of play analysis of the industry.

Following the UK’s decision to leave the European Union (EU), 65 percent of automotive executives believe that the EU as it is today “will be history in 2025”. This scenario would not only jeopardise the free trade zone within the EU, but also “disruptively affect the automotive industry worldwide”.

Now in its 18th year, the study assesses the current state and future prospects of the worldwide automotive industry, gathering the opinions of almost 1000 executives from 42 different companies.

Respondents believe that the end of the EU would trigger an automotive production shortage in Western European countries by 2030 – in addition to the globalisation and development of China’s sales market – which would see car production fall from 13.1 million to 5.4 million within 13 years.

The survey states: “Not only will macroeconomic risks and geopolitical turmoil have a significant impact on the automotive sector in Western Europe, the emergence of China as the most important automotive sales market will also lead to dramatic dependencies for some auto manufacturers in the region”.

Furthermore, 76 percent of executives agree that China will dominate more than 40 percent of its global share of vehicle sales by 2030, and will continue to keep its “pole position as world leader for sales in the automotive industry”.

It is also estimated that China would need to sell a total of 43 million vehicles to reach its predicted figure. Over 56 percent of global executives believe that the country is a “high growth market for traditional and mass volume manufacturers”.

The survey notes that “China is absolutely seen by executives as a high growth market primarily for mass and volume manufacturers as well as for premium manufacturers. This leads to the conclusion that innovations will be developed for China but not necessarily by Chinese players”.

Overall, the effect of Brexit could prove to be more damaging to Western Europe than first thought. The threat of a depleted EU could see British automotive trade diminish.

Report: ‘Global Automotive Executive Survey 2017’

The shape of things to come

BY Richard Summerfield

As 2016 demonstrated, we live in changeable, unpredictable times. Regardless, PwC has offered a bold forecast for the state of the global economic order. In a report released this week, 'The World in 2050', PwC sets out its long-term global growth projections to 2050 for 32 of the largest economies in the world. Those countries account for around 85 percent of world’s GDP.

According to PwC, the global economy could more than double in size. It forecasts cumulative global GDP growth of 130 percent between 2016 and 2050. Much of this growth will be seen in emerging markets, which could grow at twice the speed of developed nations and see their of global GDP rise from around 35 percent to around 50 percent by 2050.

China will most likely be the largest economy in the world, accounting for around 20 percent of world GDP in 2050. In total, six of the seven largest global economies will be found in the emerging markets. Mexico and Indonesia could emerge as significant forces in the coming decades. In order for emerging markets to realise their long-term growth potential, they will need to enhance their institutions and infrastructure. Greater investment in education, infrastructure and technology is necessary. Diversifying their economies will also help with sustainable growth.

By contrast, developed markets such as the US will not fare as well. The US could be down to third place in the global GDP rankings behind China and India. The EU27’s share of world GDP could fall below 10 percent by 2050. The UK could drop to 10th place.

But these various levels of economic growth are dependent on political and economic policy decisions. As John Hawksworth, chief economist at PwC UK, notes, “a populist backlash against globalisation, automation and the perceived impact of these trends in increasing income inequality and weakening social cohesion” will pose a genuine threat to growth, both in the developed and developing worlds.

He continues: “There is no silver bullet to address these concerns. They require determined efforts by governments to boost the quality of education and training, and address perceived unfairness through well targeted fiscal policies. They also require real political leadership to resist calls for increased protectionism and maintain momentum on longer term issues like climate change and global poverty reduction.”

Report: The World in 2050

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