M&A booms in Q1 2015

BY Richard Summerfield

2014 was a notable year for global mergers and acquisitions (M&A) activity, with deal volumes and valuations reaching pre-crisis highs in some regions. This  boom continued into the first quarter of the year, according to data released by Dealogic.

In the first three months of 2015, $902.2bn worth of M&A activity was announced - the highest first quarter total since the $1.08 trillion worth of deals announced eight years ago.

The 14 megadeals – each valued in excess of $10bn – accounted for a significant amount of  announced transactions in Q1, worth a combined $267.4bn. It was the busiest Q1 for megadeals since  15 deals were announced in the first quarter of 2006.

Cross-border M&A also performed well, reaching $315.2bn - the highest first quarter volume since 2007 when activity reached $357.9bn.

The healthcare sector was the most targeted industry, with deal value of $126.5bn. The real estate space was the second most targeted industry last year with $113bn worth of announced deals  across 462 transactions, a leap of 38 percent from Q1 last year.

US targeted M&A climbed 28 percent, with a total of $415bn, up from $324.6bn. This was the highest first quarter total since 2007 when $430.7bn worth of deals were announced.

In Europe, seven of the region’s top 10 sectors saw a year on year increases in volume in the first quarter. In the construction sector, activity climbed to $11.7bn - a more than threefold increase on Q1 2014, which saw just $3.2bn worth of deals.

Report: Dealogic Global M&A Review First Quarter 2015

Social and economic changes “disrupt” global real estate fund sector and spark clamour for new investment

BY Fraser Tennant

The global real estate fund sector is currently experiencing a period of “disruption” with major social and economic changes sparking a clamour for new investment, according to a new EY report.

EY’s ‘Global market outlook 2015: trends in real estate private equity’ found that M&A deals in particular are continuing to surge, a scenario that is being driven by three main factors: (i) a desire for incremental growth; (ii) the strategic merit of transactions; and (iii) the availability of debt and equity on favourable terms.

As a consequence of this increasing demand for new investments, prices have skyrocketed, leading to the possibility of M&A dealmaking activity in 2015 exceeding the peak levels of 2007.

In the US, the real estate market is currently awash with cross-border capital due to the country’s faster than most economic recovery; however, the immense popularity of this particular asset class has raised the spectre of a bubble similar to the one that enveloped Japanese investment in the US back in the 1980s.

Despite this, analysts such as Mark Grinis, EY’s global real estate fund services leader, are relatively relaxed about the perceived threats.

“If we look at history, market collapses have always been preceded by deteriorating economic fundamentals and stress factors like overdevelopment and rising vacancy rates," said Mr Grinis. “So far, there is little evidence of these precursors. What's more, industry players have moved carefully along the risk spectrum, which is why we have not seen an excessive amount of development or movement in markets that lack significant economic drivers.”

Elsewhere in the report, significant changes to the way private equity funds are administered are highlighted, with outsourced administration platforms shown to be particularly popular. And in terms of regulation, the report flags up the increasing scrutiny being directed toward the global real estate fund sector by the likes of the European Securities and Markets Authority (ESMA) and the Organisation for Economic Co-operation and Development (OECD).

The EY report is based on a series of interviews with more than 20 of EY’s global fund partners in the US, UK, Europe and Asia.

Report: Global market outlook 2015 - Trends in real estate private equity

AbbVie wins Pharmacyclics race

BY Richard Summerfield

Biotech company Pharmacyclics has agreed to be acquired by Chicago based rival AbbVie in a deal worth around $21bn.

Under the terms of the deal, Pharmacyclics shareholders will receive $261.25 per share of the company held. The offer is comprised of a mix of cash and AbbVie equity, and the transaction is expected to close by mid-2015.

AbbVie was a late entrant to the race to acquire Pharmacyclics, beating out competition from Johnson & Johnson and a third, unnamed party to secure the deal. The three way contest for Pharmacylics was driven by interest in the company’s crown jewel – Imbruvica – a cancer drug which could make an important impact on the oncology sector. The company expects US sales of Imbruvica to hit $1bn in 2015, however by 2020 worldwide sales are forecast to reach $5.8bn.

"Team Pharmacyclics is honoured and enthusiastic to join the AbbVie organisation. We share a common purpose. Together and as one, our focus remains to create a remarkable difference for patient betterment around the world," said Bob Duggan, chairman and chief executive of Pharmacyclics, in a statement announcing the deal.

"The acquisition of Pharmacyclics is a strategically compelling opportunity. The addition of Pharmacyclics' talented and innovative team will add enormous value to AbbVie," said Richard Gonzalez, chairman and chief executive of AbbVie. "Its flagship product, Imbruvica, is not only complementary to AbbVie's oncology pipeline, it has demonstrated strong clinical efficacy across a broad range of hematologic malignancies and raised the standard of care for patients."

The deal continues the trend of significant M&A transactions in the pharma and biotech sectors in 2015 to date. With announced deals including Pfizer’s purchase of Hospira for $17bn, Valeant’s acquisition of gastrointestinal drugmaker Salix for $14.5bn, and Shire's $5.2bn deal for NPS Pharma, M&A in the pharma and biotech  reached $70bn by the beginning of March - more than double the level of activity seen in the same period last year.

News: AbbVie to Pay $21 Billion for Pharmacyclics, Maker of a Promising Cancer Drug

European real estate industry “awash with capital” and set for busy 2015

BY Fraser Tennant

A busy and profitable 2105 is the outlook for the European real estate industry, according to the new 'Emerging Trends in Real Estate' Europe 2015 report published by PwC and the Urban land Institute (ULI).

The report, which features the views of 500 industry experts (investors, fund managers, developers, property companies, lenders, brokers, advisers and consultants), lists a number of cities which are considered to offer significant real estate investment opportunities this year. The cities, many of which were badly affected by the economic downturn, include Madrid, Athens, Birmingham, Amsterdam, and Lisbon.

According to the report, 70 percent of investors expect to see more equity and debt flowing into their markets in 2015, while 82 percent are of the opinion that “the availability of suitable assets will have a moderate or significant impact on their business this year".

However, despite such optimism, the report makes clear that major concerns remain with fragile economic conditions, weak fundamentals, and volatile geopolitical scenarios cited as the reasons for such uncertainty.

“Real estate investors will face a tricky balancing act in 2015," said Simon Hardwick, real estate partner at PwC Legal and one of the authors of the report. “The market is awash with capital surging into Europe from around the world. On the face of it, this is a nice problem to have, but we expect to see prices continuing to rise due to a shortage of assets. And despite an uncertain economic climate across Europe, investors will have to look beyond the major markets to secondary cities and assets they may not have considered before. This presents both an opportunity and a challenge.”

Lisette Van Doorn, chief executive of the ULI Europe, added “As confidence has returned to global real estate markets over recent years, there has been a progressive movement up the risk curve. Investors have found prime assets expensive and hard to source, and have in turn looked to find new opportunities in recovering secondary cities, secondary assets and development opportunities, as well as new or alternative real estate classes."

Now in its 12th edition, the 'Emerging Trends in Real Estate' Europe report forecasts real estate investment and development trends, cities, property sectors, and real estate finance and capital markets trends.

Report: Emerging Trends in Real Estate Europe 2015

KPMG showcases 100 of world’s best infrastructure projects

BY Fraser Tennant

One hundred of the world’s most innovative, inspirational and impactful infrastructure projects are showcased in KPMG’s new ‘Infrastructure 100: World Markets Report’.

A result of in-depth discussions with a panel of independent industry experts from across the globe, the report focuses on infrastructure in four key markets: mature International markets, economic powerhouses, smaller established markets, and emerging markets.

Hundreds of global projects were considered by the panel before the final 100 were selected.

Assessments were based on the following criteria: (i) scale – how does the scale of the project relate to similar developments in its class?; (ii) feasibility – is the project plan feasible and sustainable?; (iii) complexity – how challenging or complex is it to get stakeholder support?; (iv) innovation – is there a particular challenge the project overcomes?; and (v) impact on society – does it improve quality of life or promote economic growth?

Some of the global projects featured in the report include: Hinkley Point C Nuclear Power Station (UK); George Massey Tunnel replacement (Canada); Southern SeaWater Desalination Plant (Australia); the Scandinavian 8 Million City (Norway); Buenos Aires Bus Rapid Transit Corridors (Argentina); New York City Resiliency Plan (US); and Moscow-Kazan High Speed Rail (Russia).

Transformational, with the capacity to change the face of nations and drive economic growth, the value of global infrastructure projects is estimated by KPMG to be in the region of US$1.73 trillion.

Referencing the key trends driving global investment in the infrastructure sector, Richard Threlfall, KPMG’s UK head of infrastructure, building and construction, said “Our latest showcase of projects from around the world highlight the vision, determination and innovation required to drive economic prosperity and social impact through infrastructure development.

“Each country has its own approach to developing and funding infrastructure, yet all share the challenge of creating the right conditions to attract investment. We see infrastructure investment improving lives, creating opportunity, and bringing the world closer together – ultimately creating a better world”.

Report: Infrastructure 100 World Markets Report