European M&A dealmakers in positive mood, claims new survey

BY Fraser Tennant

Dealmaking sentiment for the year ahead across the European M&A market is positive despite the ongoing impact of last year’s Brexit vote, according to a new report by CMS in association with Mergermarket.

The report, ‘Changing tides: European M&A Outlook 2017’, which canvassed the opinions of 230 Europe-based executives from corporates and private equity firms, found that 67 percent expect European M&A activity levels to increase over the next 12 months while 5 percent anticipate a slowdown.

In comparison, last year’s survey, which was conducted shortly after the Brexit vote, was met with a subdued response from dealmakers as to upcoming European M&A, with 66 percent expecting activity to decrease over the forthcoming year and 24 percent anticipating an increase.

That said, M&A in Europe has been showing signs of stabilisation this year, with Mergermarket data revealing that M&A deals in H1 2017 sharply increased in value compared to the same period in 2016, rising 33 percent to €443bn.

“The mood among deal makers is markedly different in 2017,” confirms Stefan Brunnschweiler, head of the corporate/M&A practice group at CMS. “While acknowledging some of the challenges they face, respondents are largely optimistic about deal making prospects for the coming year, with many suggesting they are ready to take advantage of opportunities stemming from dislocations that result from Brexit and from a return to economic growth in the eurozone.”

In addition, survey respondents indicated that European financing conditions are currently favourable and that this will drive large, transformational deals over the next 12 months. Indeed, 88 percent expect similar or more favourable financing conditions over the coming year. Furthermore, 66 percent of survey respondents expect to engage in M&A, including acquisitions, divestments or both.

The report also notes that overseas buyers have been setting their sights on the European market, with four of the top 10 European deals in H1 2017 led by bidders located outside the EU – a trend that 90 percent of executives believe will continue.

“European M&A in the first half of 2017 shows positive signs of recovery, with momentum gathering as we move through the year," said Kathleen Van Aerden, head of research EMEA at Mergermarket. “The €246bn total value recorded in Q2 2017 was up 25 percent on the previous quarter and was higher than any quarter in 2016.”

A market newly refreshed with confidence, dealmakers are currently adapting to a new normal in European M&A activity.

Report: Changing tides: European M&A Outlook 2017

Global Logistics expands with $2.8bn European acquisition

BY Richard Summerfield

Global Logistics Properties, which manages around $39bn of logistics assets in Asia-Pacific and the Americas, has expanded into the European logistics market by acquiring Gazeley for around $2.8bn from Brookfield Asset Management. The transaction is expected to be funded by about $1.6bn of equity and $1.2bn of long-term, low-cost debt.

Global Logistics itself is in the process of being taken over for $11.8bn by a leading Chinese private equity consortium which includes Hillhouse Capital and the Hopu Investment Management Company, and is backed by senior executives from Global Logistics. The consortium, which is known as Nesta, will take Global Logistics private in Asia's largest private equity buyout of the year. According to Global Logistics, the deal for Gazeley is not expected to impact the timeline for the company’s privatisation.

In a statement announcing the Gazeley deal, Ming Z. Mei, co-founder and chief executive of GLP, said: “We have been looking to expand to Europe and this portfolio presents an attractive entry point given the quality and location of the assets. This transaction adds a premier operational and development platform for us in Europe and is part of our long-term strategy to expand our fund management business.”

Gazeley’s existing management team, as well as the company’s brand, are both expected to be retained when the deal has been completed.

Global Logistics will be acquiring a considerable asset portfolio in the deal. The company will gain around 32 million square feet of property currently owned by Gazeley, which is concentrated in Europe’s key logistics markets, with 57 percent in the United Kingdom, 25 percent in Germany, 14 percent in France and the remainder in the Netherlands, according to Global Logistics. Europe has long been a focus for Global Logistics; indeed, the company has been talking about expanding into the market for more than 18 months.

The company, much like the wider logistics industry, has seen a rising demand for facilities, driven by a boom in e-commerce. Earlier this year, private equity group Blackstone agreed to sell European warehouse firm Logicor to China Investment Corp for $14.4bn in a deal which further reinforces the burgeoning interest in the global logistics sector.

News: Global Logistic Properties buys European logistics firm for $2.8 billion

EU queries proposed $54bn eyewear merger

BY Richard Summerfield

European competition regulators have launched an in-depth investigation into the proposed $54bn merger between eyewear maker Luxottica and lens manufacturer Essilor, amid concerns the move could stifle competition.

If approved, the deal, which was announced in January, would create a global eyewear powerhouse with a combined current market value of around €45bn, combined sales of about €15bn and staff of more than 140,000. The merged company could have a dramatic impact on the growing global eyewear industry. Luxottica, is the world’s leading consumer eyewear group and owner of Ray-Ban, Oakley and Sunglass Hut, while Essilor is the biggest manufacturer of lenses in the world.

The companies had hoped to have the deal completed by the end of 2017, but this now seems unlikely as the European Commission has until 12 February 2018 to approve or reject the proposed merger.

According to a statement announcing the probe, the Commission's initial market investigation raised several issues relating to the combination of Essilor's strong market position in lenses and Luxottica's strong market position in eyewear. The Commission is concerned that the combined organisation may “use Luxottica's powerful brands to convince opticians to buy Essilor lenses and exclude other lens suppliers from the markets, through practices such as bundling or tying. The Commission will investigate whether such conduct could lead to, adverse effects on competition, such as limiting purchase choices or increasing prices".

Margrethe Vestager, EU competition commissioner said: “Half of Europeans wear glasses and almost all of us will need vision correction one day. Therefore we need to carefully assess whether the proposed merger would lead to higher prices or reduced choices for opticians and ultimately consumers.”

Neither Luxottica nor Essilor opted to offer concessions to allay any of the EU’s competition concerns prior to the investigation annoucement. The companies had until 19 September to offer concessions to the European Commission after initial concerns were voiced by the EU about the deal.

Both Luxottica and Essilor declined to comment on the EU’s concerns. Competition regulators in the US are also examining the deal, which has already won approval from authorities in Russia, India, Colombia, Japan, Morocco, New Zealand, South Africa and South Korea.

News: EU to investigate $54 bln Luxottica, Essilor deal

UK financial services optimism falls but stronger times lie in wait, claims new survey

BY Fraser Tennant

Optimism fell across the UK financial services sector in the three months to September 2017, despite a broad expansion of business volumes and expectations of stronger quarters to come, according to a survey published this week.

The quarterly survey of 94 financial services firms by the Confederation of British Industry (CBI) and PwC found that while banks and building societies were markedly less optimistic, finance houses, life insurers and investment managers were more optimistic than they had been in the previous three months.

Among a number of key findings, the survey found that: (i) 12 percent of firms said they were more optimistic about the overall business situation compared with three months ago, while 18 percent were less optimistic, giving a balance of minus 6 percent; (ii) 28 percent of firms said that business volumes were up, while 15 percent said they were down, giving a rounded balance of plus 13 percent (this compares with plus 44 percent in June); and (iii) to the quarter to December, growth in business volumes is expected to accelerate, with 34 percent of firms expecting volumes to rise next quarter, and 7 percent expecting them to fall, giving a balance of plus 27 percent.

“While demand in the sector is expected to hold up in the near-term, we cannot ignore the fact that optimism has dropped in almost every quarter for the past two years,” said Rain Newton-Smith, chief economist at the CBI. “With Brexit uncertainty affecting the wider economy, it is vital that substantive progress is made during the next round of Brexit negotiations, so that transitional arrangements can be agreed and businesses can make decisions now about investment and employment that will affect economic growth and jobs far into the future.”

In terms of the future of the financial services sector, survey respondents stated a need for action – including preserving access to talent and ensuring internationally focused regulation – on a number of fronts to ensure that the UK remains a leading financial centre.

Andrew Kail, head of financial services at PwC, concluded: “The financial services sector is at a crossroads. The way ahead is uncertain, particularly as Brexit negotiations are yet to be resolved. A coordinated action is now required by government, financial services firms and regulators to ensure the continued future success of the industry and its customers.”

News: British banks' pessimism in worst run since financial crisis

Cyber criminals increasingly deploying sophisticated malware as attack tools, warns report

BY Fraser Tennant

Cyber criminals across the globe are increasingly deploying sophisticated malware such as adware and ransomware to attack companies, warns a new report by Check Point Software Technologies Ltd.

In ‘Global Cyber Attack Trends 2017’, Check Point notes that the global cyber landscape in 2017 appears to have picked up where 2016 left off, with cyber threats emerging on a monthly basis that are increasingly sophisticated, featuring new capabilities and distribution methods.

Among the key trends identified in the report are: (i) nation-state cyber weapons are now in the hands of criminals; (ii) the line between adware and malware is fading, and mobile adware botnets are on the rise; (iii) macro-based downloaders continue to evolve; (iv) a new wave of mobile bankers has arrived on Google Play undetected to infect users; and (v) threat actors are continuing to sell new malware-as-a-service though several platforms, increasing the risk of data breaches.

Also highlighted in the report are today’s most prevalent examples of global malware and ransomware and the regions of the world which attackers target most often.

Acccording to the report: “2017 is shedding light on a new trend – simple, yet highly effective malware families are causing rapid destruction globally. The samples are distributed by unknown threat actors, yet wield high-end attack tools and techniques developed by elite nation-state actors. In addition, massive theft operations, such as the infamous Shadow Brokers leak of tools allegedly developed by the US National Security Agency (NSA), have led to some of the world’s most sophisticated malware ending up in the hands of unskilled attackers.”

Also analysed is the impact of the WannaCry and NotPetya ransomware which has affected public infrastructure as well as medical facilities around the world, with the report noting that many of these attacks could have been blocked had the proper security measures been in place.

“Even with WannaCry and NotPetya making global headlines, most organisations continue to rely on a strategy of detection and response after an attack has occurred as their primary means of defence,” continues the report. “Unfortunately, 99 percent of organisations still have not put in place the fundamental cyber security technologies available to prevent these types of attacks.”

To keep ahead of cyber threats, the report advises companies to stay alert and concludes: “To provide organisations with the best level of protection, security experts must be attuned to the ever-changing landscape and the latest threats and attack methods to keep their security posture at the highest standard.”

Report: Global Cyber Attack Trends 2017