7th Annual Brunswick Group M&A Survey

M&A Survey

7th Annual

FOR THE SEVENTH 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 second year soliciting

European advisors’ views and the third with insights from Greater China. Over 160 top deal bankers and lawyers

participated in this year’s global survey: 92 from North America, 33 from Europe and 43 from Greater China.

EXECUTIVE SUMMARY

• Confidence in the global M&A landscape remains high with North America-based, Greater

China-based and Europe-based advisors expecting deal activity in their local region to increase in

2014 (83%, 74% and 72% respectively). Confidence among dealmakers in Europe and Greater

China has improved since last year, up by 11% and 7% respectively.

• Global M&A activity is also predicted to increase over 2013 by North American and Greater

China based advisors (78% and 77% respectively).

• North American and European advisors see this uptick being driven by strong CEO and Board

confidence (63% and 75%, respectively, see this as the key driver), while Greater China-based

advisors see growing appetite for foreign expansion among privately-owned Chinese companies

(53%) and Chinese State Owned Enterprises (50%) as the top factors.

• In terms of the direction of deal activity, North American advisors expect inbound investment to primarily come

from Asia (58%) and Europe (36%, up from 23% last year). Meanwhile, European advisors are anticipating an in-flow

of M&A investment from North America (72%, up from 61% last year), while China advisors expect acquisitions by

Chinese companies to be targeted towards Europe (46%) & Africa (27%).

• The rise of shareholder activism is set to continue, with two thirds of advisors or more expecting to see an increase

in the level of deal interference by shareholder activists in 2014 (88% in Europe, 69% in North America and 64% in

Greater China). Advisors in Europe and North America predict that shareholder activists are most likely to demand

spinoffs, sales or divestitures (52% and 39% respectively).

• Almost all advisors in North America, Greater China and Europe expect anti-trust scrutiny for cross border deals

to stay the same or increase across all regions tested in 2014.

The results of the survey are released ahead of the 26th 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: http://www.brunswickgroup.com/publications/surveys/

EXECUTIVE SUMMARY

• Confidence in the global M&A landscape remains high with North America-based, Greater

China-based and Europe-based advisors expecting deal activity in their local region to increase in

2014 (83%, 74% and 72% respectively). Confidence among dealmakers in Europe and Greater

China has improved since last year, up by 11% and 7% respectively.

• Global M&A activity is also predicted to increase over 2013 by North American and Greater

China based advisors (78% and 77% respectively).

• North American and European advisors see this uptick being driven by strong CEO and Board

confidence (63% and 75%, respectively, see this as the key driver), while Greater China-based

advisors see growing appetite for foreign expansion among privately-owned Chinese companies

(53%) and Chinese State Owned Enterprises (50%) as the top factors.

• In terms of the direction of deal activity, North American advisors expect inbound investment to primarily come

from Asia (58%) and Europe (36%, up from 23% last year). Meanwhile, European advisors are anticipating an in-flow

of M&A investment from North America (72%, up from 61% last year), while China advisors expect acquisitions by

Chinese companies to be targeted towards Europe (46%) & Africa (27%).

• The rise of shareholder activism is set to continue, with two thirds of advisors or more expecting to see an increase

in the level of deal interference by shareholder activists in 2014 (88% in Europe, 69% in North America and 64% in

Greater China). Advisors in Europe and North America predict that shareholder activists are most likely to demand

spinoffs, sales or divestitures (52% and 39% respectively).

• Almost all advisors in North America, Greater China and Europe expect anti-trust scrutiny for cross border deals

to stay the same or increase across all regions tested in 2014.

1A

Compared to 2013, do you expect the level of North American M&A will increase, decrease or stay at the same level in 2014?

Confidence in deal activity remains high, almost all of those surveyed believe North American M&A volume will either increase (83%) or stay the same (15%) this year.

201220112010 2013 2014

DecreaseStay the sameIncrease

2%

10%

42%

48%

3%

97%

0

15%

83%

8%

22%

78%

92%

00

1B

Compared to 2013, do you expect the level of Greater China M&A will increase, decrease or stay at the same level in 2014?

Nearly three quaters (74%) of advisors survyed in China think M&A in Greater China will increase in 2014, up from 67% in 2013.

76%

20%

4%

67%

30%

4%

74%

26%

0

2012 2013 2014


1C

Compared to 2013, do you expect the level of European M&A will increase, decrease or stay at the same level in 2014?

Almost three quarters (72%) of Europe-based advisors expect the level of European M&A to increase in 2014. This percentage has increased from 61% in 2013.

2013 2014

61%

33%

6%

72%

24%

3%


2A

Compared to 2013, do you expect the level of global M&A will increase, decrease or stay at the same level in 2014?

Nearly four in five (78%) North America-based advisors expect to see increased global M&A activity in 2014. This is fairly consistent with 2013 views (82%).

2012

2013

2014


78%

82%

49% 28% 23%

15%

19% 4%

3%

2B

Compared to 2013, do you expect the level of global M&A will increase, decrease or stay at the same level in 2014?

Three in four (77%) Greater China-based advisors expect to see an increase in the level of global activity in 2014, only 3% expect a global decline.

2012

2013

2014


77%

74%

56% 36%

22%

20% 3%

4%

4%

3Compared to 2013, do you think the level of mega-deals and leveraged buyouts will increase, decrease or stay at the same level in 2014?

Increase

Stay the same

20%

71%

Decrease

8%

Seven in ten (71%) North American advisors expect to see an uptick in the level of mega-deals and leveraged buyouts in 2014, down from 89% in 2013.

4Compared to 2013, do you expect the level of North American corporate spinoffs and divestitures will increase, decrease or stay at the same level in 2014?

Three in five North American advisors (60%) see corporate spinoffs and divestitures in North America increasing in 2014, while 36% see the level staying the same and 5% see a decrease in 2014.

5%

Decrease

36%

Stay the same

60%

Increase

5A

North American dealmakers predict a mergers and acquisitions surge this year, propelled mainly by greater confidence among CEOs and board members (63%). Shareholder activism and pressure from investors (47%) and greater availability of credit and the low interest rate environment (46%) are also thought to be key factors.

What are the key factors that will drive M&A in 2014?

46%45%63%

16%6%16%

63%64%61%CEO / Board confidence

47%44%28%Shareholder activism / pressure from investors

Availability of credit and low interest rate environment

40%53%70%Improving economy

25%30%20%Equity market rebound in U.S.

Cost cutting / synergies

32%N/AN/AStrategic repositioning (new lines of business, geographic expansion)

4%8%0Other

22%36%63%More cash on balance sheets

5B

Greater China-based deal advisors see the primary drivers of increased M&A in 2014 as a growing appetite among privately-owned Chinese companies (53%) and Chinese State Owned Enterprises (50%) for foreign expansion.

What are the key factors that will drive M&A in 2014?

17%44%28%Shareholder activism / pressure from investors

20%45%63%Availability of credit and low interest rate environment

23%45%63%Opportunities in struggling Western economies

50%45%63%Growing appetite among Chinese SOEs for outward expansion

53%38%84%Growing appetite among privately-owned Chinese companies for outward expansion

23%53%70%Improving economy

10%30%20%Equity market rebound in U.S.

3%6%16%Cost cutting / synergies

23%N/AN/AStrategic repositioning (new lines of business, geographic expansion)

13%8%0Other

27%36%63%More cash on balance sheets

30%64%61%CEO / Board confidence

5CWhat are the key factors that will drive M&A in 2014?

Increased confidence among CEOs and board members (75%) is seen as the primary driver of increased European M&Ain 2014 followed by the improving economy (54%) and greater availability of credit and the low interest rate environment (50%).

50%56%

7%50%

75%72%CEO / Board confidence

25%28%Shareholder activism / pressure from investors

Availability of credit and low interest rate environment

54%17%

11%30%Equity market rebound in U.S.

Cost cutting / synergies

29%N/AStrategic repositioning (new lines of business, geographic expansion)

017%

27%39%More cash on balance sheets

Improving economy

Other

6A

What type of deals do you expect to drive the North American M&A market in 2014?

Domestic transactions among strategic buyers (72%) are expected to make up the majority of the North American M&A market in 2014.

– foreign acquirersinto the U.S.

Inbound Outbound– U.S. acquirers

outside of the U.S.

6% 6%

Domestic transactions among strategic buyers Private equity72% 15%

6B

What type of deals do you expect to drive the Greater China M&A market in 2014?

Nearly three in four (73%) China-based advisors expect the Greater China deal market to be driven by Chinese companies pursuing foreign opportunities, while domestic transactions (10%) and private equities (10%) are expected to play a smaller role in 2014.

– foreign acquirersinto the China

Inbound Outbound– Chinese acquirers outside of the China

73%3%

Domestic transactions among strategic buyers 10% Private equity 10%

Other 3%

6C

What type of deals do you expect to drive the European M&A market in 2014?

More than half (56%) of Europe-based advisors surveyed believe the European M&A market will be comprised of foreign acquirers pursuing opportunities in Europe, while 19% expect private equity and 15% see European companies pursing foreign opportunities to be key factors.

– foreign acquirersinto the U.S.

Inbound Outbound– U.S. acquirers

outside of the U.S.

15%56%

Domestic transactions among strategic buyers Private equity11% 19%

7A

What sectors do you anticipate are the most ripe for consolidation in 2014?

North American deal makers predict the most active sectors for consolidation in 2014 will be Healthcare (73%) and Technology and telecoms (70%)

Automotive 14% 1%

Consumer Goods / Retail 31% 41%

Energy 10% 43%

Financial Services 10% 17%

Healthcare 14% 73%

Industry / Engineering 5% 11%

Media 0 15%

Metals / Mining 2% 11%

Utilities 2% 4%

Technology & Telecoms 22% 70%

Other 2% 1%

2013 2014

7B


The Technology and telecoms (67%) and Healthcare (57%) sectors are thought to be most ripe for consolidation in Greater China in 2014.

Automotive 0 10%

Consumer Goods / Retail 16% 33%

Energy 8% 20%


Healthcare 0 57%

Industry / Engineering 0 20%

Media 0 13%

Metals / Mining 0 20%

Utilities 0 0


Other 8% 0

2013 2014

7C


Europe-based advisors believe the Technology and telecoms sector (60%) is ripest for consolidation in 2014, followed by the financial services (40%) sector.

Automotive 12% 4%

Consumer Goods / Retail 0 36%

Energy 24% 36%


Healthcare 14% 36%

Industry / Engineering 18% 28%

Media 0 12%

Metals / Mining 6% 12%

Utilities 6% 28%


Other 0 4%

2013 2014

8What sectors do you anticipate will receive the most antitrust scrutiny related to merger

activity in 2014?

The sectors North American advisors anticipate will receive the most antitrust scrutiny related to

merger activity in 2014 are Technology and telecoms (77%) and Media (61%).

28%Consumer Goods / Retail

28%Energy

61%Media

9%Metals / Mining

77%Technology & Telecoms

39%Healthcare

9A

What region do you anticipate foreign acquirers into North America coming from in 2014?

Asia is expected to continue to be the principle foreign buyer in North America (58%). North

American advisors expect more European buyers to be active in 2014 (36%, up from 23%), while only

3% expect buyers to be from Latin America (down from 11% in 2013)

Asia

58%

Au

stralasia

1%

Middle East1%Europe

36%

Latin America3%

9B

What region do you anticipate the most foreign acquirers into Greater China coming from in 2014?

For Greater China based advisors, North America is expected to remain the top buyer in Greater China

(57%). More respondents expect foreign acquirers to come from Europe and (21%, up from 12%) and

fewer buyers from Australasia (11%, down from 19%) in 2014.

Australasia

11%

Nor

th America

57%

Latin

America

4%

Afr

ica

4%

Mid

dle East

4%Eu

ro

pe

21%

9C

What region do you anticipate the most foreign acquirers into Europe coming from in 2014?

Most Europe-based advisors believe foreign acquirers are most likely to come from North America

(72%) in 2014, an uptick from 61% in 2013.

Nor

th America

72% Asia

28%

10Compared to 2013, do you expect the number of North American companies re-domiciling to other

countries as part of cross-border transactions will increase, decrease or stay the same in 2014?

North American advisors say the number of North American companies re-domiciling to other

countries as part of cross-border transactions will increase (45%) or stay the same (41%) in 2014.

13%

Decrease

41%

Stay the same

45%

Increase

11Compared to 2013, do you expect the level of public deals in Germany to:

Two in three (64%) Europe-based advisors expect the level of public deals in Germany to stay

the same as it was in 2013.

4%

Decrease

64%

Stay the same

32%

Increase

12What impact, if any, do you think the political tension in the Asia region (e.g. between China and

Japan) will have on intra-Asian deal activity in 2014?

Political tension in the Asia region is not expected to have a significant impact on intra-Asian deal activity in

2014, with half (46%) of Greater China advisors predicting a minor reduction in deal activity and almost as many

(43%) anticipating no impact at all.

11%64%

43%

Major reduction in deal activity

Minor reduction in deal activity

None

13A

In 2014, do you expect the level of antitrust scrutiny for cross-border deals in the

following regions to increase, decrease, or stay the same?

Almost all respondents in North America expect anti-trust scrutiny for cross border deals to stay the same or

increase across all regions tested. More than twice as many expect the level of antitrust scrutiny for cross-border

deals in North America and Europe to stay the same (NA: 66%, EU: 71%) than think it will increase (NA: 31%,

EU: 29%) in 2014. Advisors are divided on whether scrutiny will increase (50%) or stay the same (50%) in

Greater China.

DecreaseIncreaseStay the same

3%

ChinaEuropeNorth America

66%

31%

71%

29%

50%

50%

13B

In 2014, do you expect the level of antitrust scrutiny for cross-border deals to

increase/ decrease/ stay the same

Almost all respondents in Greater China expect anti-trust scrutiny for cross border deals to stay the same or

increase across all regions tested. Antitrust scrutiny for cross border deals is expected to increase in Greater

China (67%) and North America (57%).


3%

ChinaEurope

10%

North America

40%

57%

57%

43%

23%

67%

13C

In 2014, do you expect the level of antitrust scrutiny for cross-border deals to

increase/ decrease/ stay the same

European-based advisors tend to think anti-trust scrutiny for cross border deals is most likely to stay at the same

level in 2014 in the regions tested, especially in North America (84%).

4% 4%


ChinaEuropeNorth America

84%

16%

64%

32%

56%

40%

14A

Do you expect to see more deals using:

For the first time in five years, advisors in North America expect to see a decrease in the number of deals

done with all cash (25%). More than half of respondents (58%) predict that deals will use a mix of cash

and stock although there is also an expected uptick in the number using all stock (17%).

17%

3%

35%

63%

27%

69%

5%

25%

58%

38%

66%

28%

6%

57%

5%

201220112010 2013 2014

All cash A mix of cash and stockAll stock

14BDo you expect to see more deals using:

There has been a reversal in views on the structure of funding for deals in 2014 with almost two in three

(63%) advisors in Greater China believing they will see more deals using a mix of cash and stock, than

using all cash (37%).


2013 2014

42%

58%

0

63%

37%

0

14CDo you expect to see more deals using:

Advisors in Europe expect to see a decrease in the number of deals being done with all cash (38%) and

growth in deals using a mix of cash and stock (58%) or all stock (4%).


2013 2014

22%

78%

0

58%

38%

4%

15A

Deal interference by shareholder activists is a trend expected to continue in 2014 with almost all North

American advisors predicting that shareholder activism will increase (69%) or stay the same (27%).

Given the rise in activist attacks on deals in 2013, do you expect the level of deal interference

by shareholder activists to increase, decrease, or stay the same in 2014?

Decrease

4%

Stay the same

27%

Increase

69%

15B

Nearly two in three (64%) Greater China advisors expect deal interference by shareholder activists to

increase in 2014. Only 4% believe shareholder activism will decrease.



Decrease

4%

Stay the same

32%

Increase

64%

15C

The vast majority of advisors based in Europe anticipate an increase (88%) in deal interference by

shareholder activists in 2014. The remainder (13%) think the level of activist attacks on deals will stay

at the same level as 2013.



Decrease

0

Stay the same

13%

Increase

86%

16A

Compared to 2013, do you expect the number of companies to adopt a poison pill as a

defense tool will increase, decrease or stay the same in 2014?

One in five (21%) North American advisors predict the number of companies adopting a poison pill

as a defensive tactic will increase in 2014.

Decrease

8%

Increase

71%

Stay the same

21%

16B

Compared to 2013, do you expect the number of companies to adopt a poison pill as a

defense tool will increase, decrease or stay the same in 2014?

Almost four in five (78%) Europe-based advisors believe the number of companies that adopt a

poison pill as a defence tactic will stay the same in 2014, while 13% think the number will increase.

Decrease

9%

Increase

78%

Stay the same

13%

17A

What do you expect will be the most recurring demand among shareholder activists in 2014?

North American advisors think shareholder activists are most likely to demand spinoffs, sales or

divestitures (39%) in 2014.

39%

32%

27%

3%

Board representation

Spinoffs, sales ordivestitures

Mergers and acquisitions

Share buybacks or dividends

17B

What do you expect will be the most recurring demand among shareholder activists in 2014?

Half (52%) of Europe-based advisors think shareholder activists will demand spinoffs, sales or

divestitures in 2014.

52%

30%9%

Spinoffs, sales ordivestitures

Mergers and acquisitions

9%

Board representation

Share buybacks or dividends

18Do you expect companies will agree to put shareholder activists on their boards in order

to avoid public fights in the year ahead?

Nine in ten (91%) North American advisors believe 2014 will mark the year that companies agree to

put shareholder activists on their boards to avoid public fights.

Yes

No

91%

9%

19What region do you anticipate Greater China acquirers will be buying into most during

2014?

Greater China advisors surveyed believe Greater China acquirers are most likely to invest in Europe

(46%) or Africa (27%) in 2014.

Aus

tralasia

15%

Latin

America4%

Afr

ica

27%

Mid

dle East

8%Eu

rope

46%

20When you are representing a seller of an asset, are there some countries from which you are more nervous about the buyer? Which ones?

Greater China deal advisors are most nervous about buyers located in Latin America (75%) and

Mainland China (67%).

Other (outside Asia) 8%

Indonesia 38%

Australasia 50%

North America 33%

Latin America 75%

Malaysia 13%

Middle East 17%

Europe 8%

4%Hong Kong

Mainland China 67%

0Singapore

0Japan

0Other (Asia)

0Africa

0Russia

0India

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7th Annual Brunswick Group M&A Survey