6th Annual Brunswick Group M&A Survey

M&A Survey

6th Annual

FOR THE SIXTH CONSECUTIVE YEAR, the Brunswick Group M&A Survey has polled leading deal practitioners on their outlook for the coming year’s deal landscape and trends. This is the first year soliciting European advisors’ views and the second with insights from Greater China. Over 100 top deal bankers and lawyers participated in this year’s global survey, and their views indicate that 2013 is shaping up to be a banner year:

• 2013 opens with record-setting confidence in the global M&A landscape with North America-based, Greater China-based and Europe-based advisors expecting deal activity globally to increase (82%, 74%, and 88%, respectively) over 2012. 97% of North American advisors see activity within North America increasing in 2013.

• North American and European advisors see this uptick being driven by strong CEO and Board confidence (64% and 72%, respectively, see this as the key driver), while 69% of Greater China-based advisors see growing appetite among Chinese State Owned Enterprises for outward expansion as the top factor.

• North America-based advisors see M&A activity as more likely among domestic players (71%) than inbound (18%) or outbound (3%) pursuits; Greater China-based advisors see M&A activity being driven by Chinese companies pursuing outbound deals (77%); and Europe-based advisors see foreign companies pursuing deals within Europe (59%) driving local M&A activity.

• In North America, the ripest sectors seen for consolidation are consumer goods (31%) and technology and telecoms (22%), while manufacturing (20%), technology (20%) and consumer goods (16%) are expected to fuel activity in Greater China. In Europe, energy and financial services are expected to drive the uptick (24% see each as the most active sector).

• 89% of North America-based advisors expect leveraged buyouts to make a major comeback in 2013.

The results of the survey are released ahead of the 25th Annual Tulane University Law School Corporate Law Institute, the leading M&A conference in the U.S. that draws lawyers, bankers, Delaware judges, proxy solicitors and other members of the deal community.

For further information: www.brunswickgroup.com/insights-analysis/surveys.aspx

www.brunswickgroup.com/insights-analysis/surveys.aspx

* In 2010, the question was written as “Given the Level of M&A in Q1, do you expect activity for the rest of 2010 to…?”** In 2011, the question was written as “Given the level of domestic M&A in Q1, do you expect activity for the rest of 2011 to:”

1a. Compared to 2012, do you expect the level of North American M&A will increase, decrease or stay the same level in 2013?

North American advisors are overwhelmingly bullish on North American deal activity for the coming year with not a single respondent expecting a decrease in North American deal flow during 2013.

1. Compared to 2012, do you expect the level of North American M&A will increase, decrease or stay at the same level in 2013?

* In 2010, the question was written as “Given the Level of M&A in Q1, do you expect activity for the rest of 2010 to…?”** In 2011, the question was written as “Given the level of domestic M&A in Q1, do you expect activity for the rest of 2011 to:”

78%92%

48%

97%

22%8%

42%

3%0%0%

10%

0%2010* 2011** 2012 2013

Increase Stay the same Decrease

1b. Compared to 2012, do you expect the level of Greater China M&A will increase, decrease or stay the same level in 2013?

Two thirds of advisors surveyed in China expect an uptick in M&A in Greater China in 2013 (67%), down from 76% in 2012.

Q1b. Compared to 2012, do you expect the level of Greater China M&A will increase, decrease or stay at the same level in 2013?

76%67%

20%30%

4%4%

2012 2013


1c. Compared to 2012, do you expect the level of European M&A will increase, decrease or stay the same level in 2013?

61% of Europe-based advisors see M&A increasing within the region in 2013, while a third (33%) believe the level of activity will stay the same and 6% see a decrease.

1c. Compared to 2012, do you expect the level of European M&A will increase, decrease or stay at the same level in 2013?

61%

33%

6%


North America-based deal practitioners expect to see increased global activity in 2013, up 33 percentage points from a year earlier, with just 3% expecting a global decline in deal flow.

2. Compared to 2012, do you expect the level of global M&A will increase, decrease or stay at the same level in 2013?

49%

82%

28%

15%23%3%

2012 2013


2a. Compared to 2012, do you expect the level of global M&A will increase, decrease or stay at the same level in 2013?

Three in four (74%) Greater China based advisors expect global M&A activity to be on the rise this year, up from 56% last year.

56%74%

36%22%

8% 4%

2012 2013


Q2b. Compared to 2012, do you expect the level of global M&A will increase, decrease or stay at the same level in 2013?

2b.Compared to 2012, do you expect the level of global M&A will increase, decrease or stay at the same level in 2013?

Nine in ten (88%) European advisors foresee an increase in global deals this year and 12% expect levels to be consistent with last year. Not a single European advisor that was surveyed expects a decrease in global M&A this year.

88%

12%0%


Q2c. Compared to 2012, do you expect the level of global M&A will increase, decrease or stay at the same level in 2013?

2c.Compared to 2012, do you expect the level of global M&A will increase, decrease or stay at the same level in 2013?

Three in five North American advisors (61%) see corporate spinoffs and divestitures in North America rising in 2013, while 33% see the level staying the same and 3% see a decrease in 2013.

3. Compared to 2012, do you expect the level of North American corporate spinoffs and divestitures will increase, decrease or stay at the same level in 2013?

61%

33%

6%


3. Compared to 2012, do you expect the level of North American corporate spinoffs and divestitures will increase, decrease or stay at the same level in 2013?

* In 2012, “Improving economy” was fielded as “Economic conditions”** In 2012, “More cash on balance sheets” and “Greater availability of credit and low interest rate environment” were combined and fielded as “More cash on balance sheets / availability of credit”*** In 2012, “Equity market rebound in U.S.” was fielded as “Equity market recovery”**** In 2012, “Cost cutting / synergies” was fielded as “Emphasis on cost cutting / synergy benefits”***** Not asked in 2012

4a. What are the key factors that will drive North American M&A in 2013? Please select the top three.

4. What are the key factors that will drive M&A in 2013? Please select the top three.

* In 2012, “Improving economy” was fielded as “Economic conditions”** In 2012, “More cash on balance sheets” and “Greater availability of credit and low interest rate environment” were combined and fielded as “More cash on balance sheets / availability of credit”*** In 2012, “Equity market rebound in U.S.” was fielded as “Equity market recovery”**** In 2012, “Cost cutting / synergies” was fielded as “Emphasis on cost cutting / synergy benefits”***** Not asked in 2012

64%

53%

45%

44%

36%

30%

6%

8%

61%

70%

63%

28%

63%

20%

15%

CEO / Board confidence

Improving economy*

Greater availability of credit and low interest rateenvironment**

Shareholder activism / pressure from investors

More cash on balance sheets**

Equity market rebound in U.S.***

Cost cutting / synergies****

Other*****20132012

Strong CEO / Board confidence is seen as the primary driver of increased M&A in 2013 while the improving economy and availability of credit will also help fuel the projected uptick in 2013 M&A activity.

* In 2012, “Growing appetite among Chinese SOEs for outward expansion “ and “Growing appetite among privately-owned Chinese companies for outward expansion” were combined and asked as “Growing appetite for outward expansion among Chinese companies”** Not asked in 2012.*** In 2012, “More cash on balance sheets” and “Greater availability of credit and low interest rate environment” were combined and fielded as “More cash on balance sheets / availability of credit”**** In 2012, “Improving economy” was fielded as “Economic conditions”***** In 2012, “Cost cutting / synergies” was fielded as “Emphasis on cost cutting / synergy benefits”

4b. What are the key factors that will drive Greater China M&A in 2013? Please select the top three.

Q4b. What are the key factors that will drive M&A in 2013? Please select top three.

* In 2012, “Growing appetite among Chinese SOEs for outward expansion “ and “Growing appetite among privately-owned Chinese companies for outward expansion” were combined and asked as “Growing appetite for outward expansion among Chinese companies”** Not asked in 2012.*** In 2012, “More cash on balance sheets” and “Greater availability of credit and low interest rate environment” were combined and fielded as “More cash on balance sheets / availability of credit”**** In 2012, “Improving economy” was fielded as “Economic conditions”***** In 2012, “Cost cutting / synergies” was fielded as “Emphasis on cost cutting / synergy benefits”

69%

58%

38%

31%

27%

19%

15%

15%

12%

8%

0%

84%

72%

84%

36%

36%

36%

4%

4%

4%

8%

Growing appetite among Chinese SOEs for outward expansion*

Opportunities in struggling Western economies

Growing appetite among privately-owned Chinese companies foroutward expansion*

A more favorable political environment following elections /leadership transition in the US & China**

Greater availability of credit and low interest rate environment***

Improving economy****

More cash on balance sheets***



Cost cutting / synergies*****

Other

20132012

There remains clear consensus among deal advisors in China that state owned entities have a strong appetite for outward expansion by pursuing foreign companies (69% see as the key driver in 2013, compared with 84% in 2012).

4c. What are the key factors that will drive European M&A in 2013? Please select the top three.

4c. What are the key factors that will drive M&A in 2013? Please select top three.

72%

56%

50%

39%

28%

17%

6%

17%


Greater availability of credit and low interestrate environment

Cost cutting / synergies

More cash on balance sheets


Improving economy

Further development of the Euro Crisis

Other

Europe-based M&A advisors see rising CEO / Board confidence and attractive financing opportunities as key drivers for M&A in 2013 (72% and 56%, respectively, see these as key factors).

5a. What type of deals do you expect to drive the North American M&A market in 2013?

Deals among domestic players are overwhelmingly seen (71%) as the most likely driver of the 2013 North American deal market and inbound pursuits remain a consideration (18%), while outbound (3%), and private equity (8%) plays are expected to take a back seat in 2013.

5. What type of deals do you expect to drive the North American M&A market in 2013?

Domestic transactions among strategic buyers – 71%

Inbound –foreign acquirers into the U.S. – 18% Outbound –

U.S. acquirers outside of the U.S. – 3%

$$$ Private equity – 8%

5b. What type of deals do you expect to drive the Greater China M&A market in 2013?

Looking at what types of deals will drive M&A in Greater China, three fourths of China-based advisors surveyed (77%) see Chinese companies pursuing foreign opportunities while 12% expect domestic transactions among strategic buyers and 12% expect private equity to dominate the landscape.

Q5b. What type of deals do you expect to drive the Greater China M&A market in 2013?

Domestic transactions among strategic buyers – 12%

Outbound –Greater China acquirers outside of Greater China – 77%

$$$ Private equity – 12%

5c. What type of deals do you expect to drive the European M&A market in 2013?

Domestic transactions among strategic buyers –6%

Inbound – foreign acquirers into Europe – 59%

Outbound – European acquirers outside of Europe – 18%

Private equity –18%

5c. What type of deals do you expect to drive the European M&A market in 2013?

Looking at what types of deals will drive M&A in Europe, three in five Europe-based advisors surveyed (59%) see foreign acquirers pursuing opportunities within Europe while 18% expect private equity and 18% see European companies pursuing foreign opportunities to be key factors.

6a. What sector do you anticipate is most ripe for consolidation in North America in 2013?

For the first time, deals in the consumer goods sector are seen as the most likely, with the percentage of advisors selecting that sector as the most active tripling since 2011 (31%, up from 10%). The technology / telecoms (22%) and energy sectors (15%) are expected to also be ripe for consolidation in 2013.

* No data for 2012

6. What sector do you anticipate is most ripe for consolidation in 2013?

14% 9% 10%

31%13% 13%

22%

15%

18% 17%

15%

25%

24% 21%

14%17%17%

10%5%

8% 8% 14%

2%6% 5% 2%4% 5% 5%

2% 2%

2009 2010 2011 2012* 2013

Other

Automotive

Utilities

Media

Metals / Mining

Industry / Engineering

Financial services

Healthcare

Energy

Technology & Telecoms

Consumer goods / Retail

* No data for 2012

24%

6b. What sector do you anticipate is most ripe for consolidation in Greater China in 2013?

Among China-based advisors surveyed, the ripest sectors for consolidation are manufacturing (20%), technology (20%) and consumer goods (16%).

* “Telecoms” and “Utilities” were fielded in 2012 and 2013, but received 0% each year.** In 2012, question was asked as “In what sector in Greater China do you expect to see the greatest amount of consolidation in 2012?”

Q6b. What sector do you anticipate is most ripe for consolidation in 2013?*

12%20%

4%

20%20%

16%20%

8%

8%0%

8%

16%

4%8%4%4%16% 0%

0% 8%

2012** 2013

Other

Healthcare

Logistics

Financial services

Property

Transportation

Raw / Industrial materials

Energy

Consumer goods / Retail

Technology

Manufacturing

* “Telecoms” and “Utilities” were fielded in 2012 and 2013, but received 0% each year.** In 2012, question was asked as “In what sector in Greater China do you expect to see the greatest amount of consolidation in 2012?”

4%

0%

6c. What sector do you anticipate is most ripe for consolidation in Europe in 2013?

The financial services and energy sectors in Europe are expected to be the busiest in 2013, with one in four (24%) advisors surveyed in Europe believing each will be the ripest for consolidation.

* “Consumer goods / retail” and “Media” were also fielded but each received 0%.

6c. What sector do you anticipate is most ripe for consolidation in 2013?*

24%

24%18%

12%

6%

6%

6%

6% Financial services

Energy

Industry / Engineering

Automotive

Healthcare

Technology & telecoms

Utilities

Metals / mining

* “Consumer goods / retail” and “Media” were also fielded but each received 0%.

Asia is expected to be the predominant foreign buyer in North America (61%), but less so than last year when it peaked with 78% of expected in-bound activity. 23% of respondents see Europeans as the most likely buyer, while 11% see Latin America as a possible acquirer, marking a steady uptick in the second year it has been considered in the survey (from 4% in 2012).

7. What region do you anticipate the most foreign acquirers into North American coming from in 2013?

Latin America – 11%Australasia – 5%

Europe – 23%

Asia – 61%

7a.What region do you anticipate the most foreign acquirers into North America coming from in 2013?

For Greater China based advisors, North America is expected to continue to be the top foreign buyer in Greater China (58%). Fewer respondents expect Europeans to be the most active in Greater China this year (12%, down from 21%), while more advisors see buyers from Latin America (19%, up from 13%), the Middle East (8%, up from 4%), and Australasia (4%, up from 0%) on the rise.

7b. What region do you anticipate the most foreign acquirers into North American coming from in 2013?

Latin America – 4%Australasia – 19%

Europe – 12%North America –

58%

Middle East – 8%

7b.What region do you anticipate the most foreign acquirers into Greater China coming from in 2013?

European advisors believe foreign acquirers are most likely to come from North America (61%), with Asia closely behind (39%).

7c. What region do you anticipate the most foreign acquirers into North American coming from in 2013?

North America – 61% Asia – 39%

7c. What region do you anticipate the most foreign acquirers into Europe coming from in 2013?

8. Do you expect to see more deals using:

28%

57%63%

69%

6% 5% 3% 5%

66%

38% 35%27%

2010 2011 2012 2013

All cash All stock A mix of cash and stock

For the fourth consecutive year, advisors in North America expect an increase in the number of deals being done with all cash (69%), as opposed to a mix of cash and stock (27%), or all stock (5%).

8a. Do you expect to see more deals using:

Q8b. Do you expect to see more deals using:

58%

42%

All cash A mix of cash and stock All stock

The majority of advisors in Greater China believe they will be seeing more deals using all cash (58%), while two in five (42%) believe deals using a mix of cash and stock will be on the rise. No respondents believe the level of all stock deals will increase in 2013.

8b. Do you expect to see more deals using:

Q8c. Do you expect to see more deals using:

78%

22%

All cash A mix of cash and stock All stock

Nearly four in five (78%) European advisors expect to see more all cash deals in 2013. The remainder (22%) foresees more deals using a mix of cash and stock.

8c. Do you expect to see more deals using:

Nearly nine in ten North American advisors (89%) believe 2013 will mark an increase in the level of mega-deals and leveraged buyouts.

9. Compared to 2012, do you think the level of mega-deals and leveraged buyouts will increase, decrease or stay at the same level in 2013?

89%

11%


9. Compared to 2012, do you think the level of mega-deals and leveraged buyouts will increase, decrease or stay at the same level in 2013?

10. Do you expect to see more distressed M&A transactions to take place inside of bankruptcy or outside of bankruptcy?

22%

78%

Inside of bankruptcy Outside of bankruptcy

Four fifths of North American advisors surveyed (78%) believe distressed transactions will take place outside of bankruptcy rather than during the Chapter 11 process.

10. Do you expect to see more distressed M&A transactions to take place inside of bankruptcy or outside of bankruptcy?

11a. In the upcoming year, which of the following buyers do you expect to be most active in acquiring distressed assets?

Half of North American survey respondents (49%) expect to see private equity buyers as the most active in acquiring distressed assets, while a third (32%) see strategic buyers and nearly a fifth (17%) believe hedge funds will enter the mix.

11. In the upcoming year, which of the following buyers do you expect to be most active in acquiring distressed assets?

49%

32%

17%

2%

Private equity

Strategic buyers

Hedge funds

Management

11b. In the upcoming year, which of the following buyers do you expect to be most active in acquiring distressed assets?

Greater China advisors expect strategic buyers to lead private equity in terms of buying dis-tressed assets (46% vs. 29% respectively).

Q11b. In the upcoming year, which of the following buyers do you expect to be most active in acquiring distressed assets?

46%

29%

8%

8%

8%

Strategic buyers

Private equity

Hedge funds

Management

Lenders

11c. In the upcoming year, which of the following buyers do you expect to be most active in acquiring distressed assets?

European advisors predict that distressed assets will go to a mix of private equity (50%) and strategic buyers (39%).

Q11c. In the upcoming year, which of the following buyers do you expect to be most active in acquiring distressed assets?

50%

39%

11%

0%

Private equity

Strategic buyers

Hedge funds

Management

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6th Annual Brunswick Group M&A Survey