Global M&A market re-opens for business during 2010, forecasts KPMG

Looking at the regional numbers within the latestPredictor, all of the geographical regions exhibit the ‘preferred’ combination of improving PE ratios (increasing appetite) and declining net debt ratios (increasing capacity). 
Latin America shows the highest increases in PE ratios, moving up 62 percent from 8.9x to 14.5x. It is followed by AsPac (exc. Japan) at 35 percent, Africa & the Middle East at 13 percent, Europe at seven percent and North America at four percent.

On the net debt to EBITDA ratios, Africa & the Middle East forecasts a 37 percent decline (down from 0.8x to 0.5x), followed by North America at 24 percent, AsPac (exc. Japan) at 20 percent, Latin America at 18 percent and Europe at 15 percent.

The one outrider in all of this is Japan which registers a 41 percent fall in its forward PE ratio; a rare negative in an otherwise positive set of global figures – although its forecast net debt to EBITDA ratio does follow the trend with a more reassuring decline of 12 percent.

At a sector level, Basic Materials posts an excellent combination of results with forward PE up by 17 percent and net debt down by 32 percent. We can also expect M&A in Technology and Non-Cyclical Consumer Goods to perform well with 20 percent and 16 percent increases in PE ratios respectively. Healthcare and Cyclical Consumer Goods look very good on the debt front, posting 41 percent and 23 percent falls respectively.

David Simpson concluded: “Even though we have seen some resurgence in private equity deals, that sector of the market will continue to be hampered by a shortage of debt, putting it at a comparative disadvantage to corporates. The Predictor shows that corporate appetite and capacity are expected to increase - so we may confidently expect that corporate M&A will lead the way in 2010.”

M&A outlook in Vietnam

Commenting on the latest Predictor and what this might mean for Vietnam, John Ditty, Chairman, as well as Managing Partner – Advisory of KPMG in Vietnam said: “Vietnam has vast potential opportunities for foreign investment and an increase in Vietnam M&A activity is expected in 2010. Factors which make the market attractive include a large “untapped” domestic consumer market, relatively high economic growth, a stable investment environment and attractive government policies, the Governments commitment to the equitisation program, a large and growing private sector and expanding capital markets.”

“2009 economic indicators show that the economic picture for Vietnam will be brighter in 2010. The economic downturn in Vietnam bottomed in early 2009 and the country’s year-on-year GDP started to rebound after the first quarter. Vietnam’s GDP growth rate was 5.3% for 2009 and is forecasted to be 6.5% in 2010”, he added.

Pham Mai Huong, Head of KPMG’s Transaction Services team in Hanoi agrees and added: “We have, in the last 3 months, seen signs of recovery in the Vietnam M&A market, in particular foreign investors contemplating becoming strategic investors in local Vietnamese enterprises. We do expect that the atmosphere will become more positive in 2010 once the global credit markets settle and companies start to focus on their growth plans again."