published in February 2012

Despite the crisis in Europe, global perspective on mergers and acquisitions in 2012 is positive, estimates Ernst & Young

February 14, 2012

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Report shows 12 reasons to bet on a strong year for

deals between companies

Sao Paulo, February 14, 2012 - With the extension of the debt crisis in Europe, many analysts predict that 2012 will register a decline in mergers and acquisitions between companies. "There is no denying that the activity will be influenced by the macroeconomy," says Ricardo Reis, head of mergers and acquisitions at Ernst & Young Terco. "However, there are fundamental reasons that show that the practice of mergers and acquisitions may be more robust than expected."

12 The report for 2012, prepared by the multinational audit and consultancy based on surveys of corporate executives and market information, points out the reasons why you can expect a strong year in terms of mergers and acquisitions.

1. Confidence in the face of a challenge

Confidence in the global economy is surprisingly strong - two thirds of the executives of large corporations consider it at least stable, according to Capital Confidence Barometer of Ernst & Young, October 2011. This security is particularly strong in sectors such as energy and distribution, oil and gas, metals and mining.

1. New year, old appetite for deals

The value of mergers and acquisitions worldwide rose 7% in 2011, and the number could have been even greater if the credit risk of the U.S. had not been demoted and the unfolding of the crisis in the eurozone in the second half of the year does not have resulted in a 24% drop in deals compared with the first six months. However, 41% of large global corporations planning acquisitions this year.

1. Three. Reserve funds available

While the credit crunch is a real possibility for many companies due to the situation in Europe, large corporations with global investment grade still have access to credit. But many companies may not need it because they have large reserve funds with which to tell. Overall, companies today have more than $ 2.3 trillion in cash, according to analysis by Ernst & Young. The number is almost the value of all mergers and acquisitions in 2011.

1. 4. Income through the healing

Over the past three years, there was strong focus on operational fitness. The companies have strengthened their balance sheets, cut costs and reduced financial risk. Large corporations have improved their capital structures extending deadlines and reducing interest rates. The total debt decreased - according to the report of Ernst & Young Capital Confidence Barometer, 61% of cases the relationship between debt and equity reaches less than 25%.

1. Five. Sectors ripe for consolidation

The gain market leadership will be a trigger in certain business sectors. The value of mergers and acquisitions in the health sector grew in 2011, as well as activity in the technology sector, with transactions between Microsoft-like Skype to prominence. In 2012, the convergence between mobile telephony, wireless networks and technology of cloud (cloud technology) creates a growing interest in securing innovative intellectual property and valuable patents.

1. 6. The Private Equity can go back

Mergers and acquisitions by private equity funds increased by a third - to $ 306 billion - in 2011 and saw a strong fourth quarter, despite the economic turbulence generated by the crisis in the euro area. Sectors such as health, technology, oil and gas, which remained active even during the crisis, may be particularly attractive for this type of activity in 2012.

1. Seven. Bargain sales of the new year?

There is a growing convergence in asset prices. Over 80% of corporations believe that the valuation of assets or remain near current levels for most of 2012.

1. Eight. More companies agreed to divest

The Capital Confidence Barometer report shows that in 2012, 26% of large companies plan to market capitalization alienation, bringing more sellers to the market. In 2011, the U.S. saw sales grow both in volume and in value. "We can expect more sales and spin-offs for governments, banks and corporations in Europe in 2012, with the trend moving toward the East," says Ricardo Reis. "Problems of sovereign debt are likely to generate increased sales and privatization of public assets, while banks will possibly sell assets to improve the capitalization of balance," he says.

1. 9. Repositioning by restructuring

The current global macroeconomic scenario can lead to an increase in financial and operational restructuring this year, providing a source of quality assets for companies seeking acquisitions. Banks come under pressure to restructure their portfolios due to regulatory changes and increased capital needs.

10. New Year Resolution: to ensure leadership buy?

Almost two-thirds of large corporations say the main reason for making acquisitions is to gain more market share in existing or new markets, acquire new products or consolidate their existing product base, according to Capital Confidence Barometer. In current market conditions, the movement of merger and acquisition is seen as a cheaper option to achieve this goal than it would invest organically.

11. East and West meet

The markets that will attract more investments from large corporations in 2012 are China, India, Brazil, USA and Australia. The BRIC countries (Brazil, Russia, India and China) as well as Malaysia, Mexico and Argentina are the most popular emerging markets. Aside from India, the number of domestic mergers and acquisitions in the BRIC countries continues to increase, as its investments abroad, especially with the growth achieved by Brazil, Russia and China during 2011. This is likely to increase further in 2012 as the crisis in the euro area is, for example, making the rich economies such as China to redirect their investment strategies and public debt market for tangible assets such as infrastructure and natural resources.

12. A good omen - East and West meet once again

For those of superstitious nature, in the last three times in the U.S. presidential election took place during the Chinese Year of the dragon - the symbol of trust and courage - there was growth in both volume and value of transactions in mergers and acquisitions, as well as increased in global GDP. "Could this coincidence signal esoteric growth in merger and acquisition activities in 2012? Given the intense market volatility and grim news in the second half of 2011, I'm sure we all would receive this as a good omen for 2012, "concludes Ricardo Reis.

Source: http://www.ey.com.br

updated Mar/2009

The infrastructure sector leads the ranking of the ten sectors that demanded more decisions of the Administrative Budget (Cade) in 2008, with 73 acts judged Concentration - requests for evaluation of acquisition and merger sent to the organ. An increase of 40% compared to the same period in 2007.

Tied in second place with 51 transactions valued are the chemical and petrochemical segments, and computing.

  The survey also shows an increase of 5.3% in the number of requests sent to Cade in 2008, which reflects the strategy of companies to solidify in the domestic and the global scenario.

Source: Survey conducted by the office Barcellos Tucunduva Lawyers c om the basis of data provided by Cade in 2008, Engineering Magazine, 12/03/09.