Where next in M&A? Who will be targeted now?

Posted on Thursday, 19 November 2009. Filed under: Commentary, Mergers |

According to Reuters a few months back on 10 September 2009 (‘Deal Talk — Rallying stock markets help accelerate M&A plans’), a report by Natixis predicts a higher incidence of M&A in sectors including pharmaceuticals, luxury goods, transport, IT software and oil services.  It said International Business Machines Corp could pursue SAP and lists AstraZeneca and Whitbread  among potential takeover targets.  It’s always fun to look at these predictions several months later.

It’s a dangerous game trying to predict specific deals.  I have seen a list of potential targets put together in the past and a year later they make fun reading for all their errors.  Note some recent predictions by Barron’s / Wall Street Journal, consultants such as KPMG and other journalists such as Money Morning.

Conventional wisdom seems to be that the pharmaceutical industry has played out earlier this year … at least for a while.  Likewise in financial services, barring any further credit crises!  (And in fact this industry will see some of the larger, bailed out firms restructuring and selling off large divisions, which may make the acquisition volumes in this sector appear large for a while yet;  but I don’t see any large mergers happening soon.)

So where’s the activity?  Rather than industry, look at regions.  The sub-continent and Asia will continue to be strong.  The US before Europe, as Europe seems to be lagging in the face of slower economic recovery.

On industries?  How about consumer products – driven by changes in consumer behaviour from pre-recession as they leave behind the higher-priced goods and look for low price linked with quality.  Professional services, with Tower Perrin and Watson Wyatt being a harbinger of things to come (although they currently stand alone in that sector so haven’t yet started the stampede toward consolidation that I predict will happen).

Any other thoughts?  Please help me here, as I know that my crystal ball is very foggy at the moment…


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