companies in Norway have participated as either target, buyer or vendor. This ...
year 2013, which are expected to be approximately USD 500m. Furthermore ...
Transaction Trends
Transaction Advisory Services 4th edition 2013
Norwegian transactions market update
Norwegian deal market remains stable, fueled by a European bounce back? Transaction Trends, published by EY Transaction Advisory Services, is a quarterly publication that aims to identify trends in the Norwegian transactions market. Data presented in this newsletter cover all transactions where the 500 largest companies in Norway have participated as either target, buyer or vendor. This makes Transaction Trends the most comprehensive transaction newsletter available for the Norwegian market.
Also in this edition:
European Private Equity Trends
Last Twelve Months Number of Transactions by Industry Source: Mergermarket
Energy
18
Materials
4
Industrials
37
Consumer Discretionary
12
Consumer Staples
14
Healthcare
Utilities
3434 9
Telecom
Included in this issue, we have a summary of European Private Equity trends, containing interesting statistics on the market. In Q3, we saw the strongest quarter in European buyout activity since 2010, and it appears that the continent is finally getting its rebound.
8
12
12
29 29
33 33 29 13
13
12
19
0
33 33
29 14
12
33 28
16 14
8 16
32
28 26 8 10
19
22
22
33
20 10
10
17
20
19
17
Public Private
Public
Source: Mergermarket Source: Mergermarket
5
Information Technology
however, we see increased activity, which also appears to be driving deals in the home market.
Number of transactions Number of transactions
3
Financials
During the third quarter of 2013, the 500 largest Norwegian companies announced a total of 24 transactions, down from 29 transactions in the previous quarter. The average deal size, however, has increased since Q2. The lower amount of deals is due to fewer private deals, which fell from 15 deals in the second quarter to 10 deals in the third quarter. We also see fewer deals involving private equity funds in Q3 compared to the first two quarters of 2013. In the European market,
17
19
20
17
16
20
2526 1410
11
16
25
22
16
1114
11
11
32
29
22 11
24
11
24
14
16
8
29 24
1614
16
Private
24 14 14
16 15
16
10
8
15
10
Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 Q113 Q213 Q313
Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 Q113 Q213 Q313
Key highlights and market outlook Despite a decline in the number of deals, the market has remained strong in terms of total deal value, driven by large transactions including EWOS, Sevan Drilling, and a share of Statoil’s North Sea assets. We also see a continued trend of more cross-border transactions, particularly with an increase in foreign investors acquiring Norwegian assets. This may confirm a long awaited European recovery, that we also have seen signs of in the PE industry. Although the Norwegian deal market appears to be more driven by European buyers than before, and thus seeing the market more dependent on foreigners, we do see a light at the end of the tunnel: the number of Norwegian companies planning on IPOs within the next few years is increasing, which has typically been a lead indicator for the general transaction market.
On 19 August, the Austrian based oil and natural gas group OMV AG announced its acquisition of a minority interest of the North Sea assets of Statoil ASA, for a consideration of USD 2,650m. The consideration is subject to customary adjustments for the year 2013, which are expected to be approximately USD 500m. Furthermore, a contingent payment of USD 6 per boe for reserves to be developed has also been agreed on, depending on the approval of the development plan for Shetland/Lista. The assets acquired included 19% in Gullfaks fields, 24% in Gudrun, 30% in Rosebank and 5.88% in the Schiehallion field.
The transaction involves 11 options for exploration licenses, and the parties have also entered into an R&D partnership to develop new technologies for exploration. On 24 July, the Norway based listed offshore drilling company Seadrill acquired 116,934,875 shares of Oslo based Sevan Drilling ASA at an offer price of NOK 3.95 per share, representing a 19.6% stake, amounting to a value of NOK 461.9m. As a result of the above transaction, Seadrill triggered a mandatory offer, of which Seadrill offered to acquire the remaining 49.9%. for the same offer price of NOK 3.95 per share. Seadrill aimed at a 69.5% stake, but due to few acceptances among shareholders, Seadrill now only controls 50.1% of the shares, including exposure through forward contracts. Seadrill has entered into agreements with Sevan to provide technical and operational support to improve performance and reduce operating costs, as well as helping the company obtain better financing terms. On 18 July, Sweden based Altor Equity Partners and US based Bain Capital LLC agreed to acquire EWOS AS, the Norway based feed and nutrition supplier for the aquaculture industry, for a consideration of USD 1,076m. The transaction is in line with Altor and Bain Capital’s strategy to benefit from the growth potential in the aquaculture industry. On 13 August, Norway based food producer Kavli announced their acquisition of the UK goat milk producer St Helen’s Farm Ltd, from two private individuals for an undisclosed value. In 2012, St. Helens reported a revenue of USD 22.8m and a workforce of 14 employees. The company will be merged into Kavli’s UK business, and will have a combined revenue of USD 63m and a workforce of 230 employees.
Top transactions last quarter (by deal value, USDm) Source: Mergermarket
Ann. Date
2
Target
Vendor
Buyer
Deal Dom. Deal Industry Value
Target Turnover
Aug-13
North Sea Assets
Statoil ASA
OMV AG
Energy
2,650
n/a
Jul-13
EWOS AS
Cermaq ASA
Bain Capital LLC; Altor Equity Partners AB
Consumer Staples
1,076
n/a
Jul-13
Sevan Drilling ASA (50.1% Stake)
-
Seadrill Ltd
Energy
920
173.4
Jul-13
Epax AS
Trygg Pharma AS
FMC Corporation
Healthcare
345
n/a
Jul-13
DONG Generation Norge AS
DONG Energy A/S
Statoil ASA
Energy
292
n/a
| Transaction Trends 4th edition
Activity Breakdown The high share of cross border transactions has continued into the third quarter. The share has kept at a steady level compared to last quarter, at 67% up from 66%, and the last twelve months (LTM) share is now at 62%, up from 56% as of the last quarter. The share is considerably higher than the historical trend of 51% from 2008-2012, and appears to be driven mainly by foreign investors entering the Norwegian markets.
Buyer Region Source: Mergermarket
Q3 2013
5% 0% 7%
65%
0% 8% 0%
63%
Norway
Americas
Nordics (excl. Norway)
Asia-Pacific
Europe (excl. Nordics)
Other
Domestic
Cross Border
49%
51%
2008 - 2012
38%
Q3 2013
10%
13%
Transaction Type
LTM
12%
17%
The industrial sector continues to be the top deal sector in Norway on a long term basis, making up a third of the transactions over the last twelve months. Looking only at the third quarter, however, the consumer staples sector had the highest number of transactions, with five vs. four deals in the two industries, respectively.
Source: Mergermarket
LTM
62%
33%
67%
Activity by industry Source: Mergermarket
Number of Transactions Industry Energy Materials Industrials Consumer Discretionary Consumer Staples Healthcare Financials Information Technology Telecom Utilities Deal value not reported (across industries) Total
Deal Value $0 - $100 m > $100 m $0 - $100 m > $100 m $0 - $100 m > $100 m $0 - $100 m > $100 m $0 - $100 m > $100 m $0 - $100 m > $100 m $0 - $100 m > $100 m $0 - $100 m > $100 m $0 - $100 m > $100 m $0 - $100 m > $100 m
Q3 2013
LTM
2008 – 2012
3 4 1 1 1 2 1 3 -
4 9 1 2 10 5 3 3 8 3 1 1 7 1 1 2 -
17 35 10 17 44 26 23 17 19 12 6 3 23 8 29 8 8 8 3 9
8
49
202
24
110
527
Transaction Trends 4th edition |
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Activity Breakdown Average deal size in the third quarter has been estimated to USD 357m, up from USD 249m in Q2 2013. The number of high value deals has increased whereas the total number of deals has decreased, resulting in a higher average deal size for the third quarter. The number of private deals fell in the third quarter, and was the sole reason for the decline in the total number of transactions. The share of private deals is notably lower than the historical levels, where we have seen a 56% share of private deals in 2008-2012, compared to last quarter’s 42% share.
17
14
6
5
Q412
7
Q113
Q3 2013
LTM
13%
15%
13%
11%
4%
67%
15
0%5%
Norway
Americas
Nordics (excl. Norway)
Asia-Pacific
Europe (excl. Nordics)
Other
701 9 357
321
5
Q213
249
Q313 Q412
$0 - $100 m
Q113
Q213
Deal value (USDm)
> $100 m No estimate
Transaction Arena Source: Mergermarket
2008 - 2012
Public
Private
44%
56%
LTM Q3 2013
4
6%
62%
0% 4%
Source: Mergermarket & EY
10
9
4% 5%
Average deal size (est.)
Deal value by range (est.) Source: Mergermarket & EY
13
Target Region
Source: Mergermarket
| Transaction Trends 4th edition
55% 58%
45% 42%
Q313
Public Market Update There were two new listings in the third quarter, both on Oslo Stock Exchange. Ocean Yield ASA, an oil service and industrial shipping investment company, was listed on 5 July. Odfjell Drilling Ltd, an integrated offshore drilling and oil service company, was listed on 27 September. Rec Solar, the spin-off of Renewable Energy Corporation ASA (REC) and Western Bulk ASA have both been accepted for listing on Oslo Stock Exchange recently. According to several sources, there is currently a strong pipeline for IPOs both globally and in Norway, and we should expect more listings prior to entering 2014. Although the pipeline is strong, recent IPO data shows that the listing discount for IPOs on Oslo Stock Exchange so far in 2013 has been between 10%-20% of assumed market value. Multiples increased significantly in the third quarter, and the average P/E is now 10.3 YTD 2013 - the highest P/E multiple within our historical range period.
OBX Index
Source: S&P Capital IQ
500 400 300 200 100 0 2009
Oslo Stock Exchange
20 16 12
Oslo Axess 11
6
13 8 6
0 2008
3 0 3
10
2009
2010
9
7 1
2011
3
3
2012 YTD2013
20.000
Public 33.749
17.326
13.182
10.087
0 2009
2012 YTD2013
4.1 3.5 4.4 4.5 3.7
EV/EBITDA
103 102
P/B
101
Aggregated Corporate - Investment Grade Corporate P/E - High Yield Government
97
2011
Avg. OBX multiples
104
98
2010
Source: S&P Capital IQ
107
99
Employee
10.000
Source: Bloomberg
100
Private
30.000
Nordea Norwegian Bond Index
105
IPO
50.813
2008
106
2013
59.709
60.000
40.000
4
10
NOKm
50.000
8 4
2012
Source: Oslo Stock Exchange
21 16
2011
Issues by value, OSE
New listings
Source: Oslo Stock Exchange
24
2010
YTD2013 2012 2011 2010
1.5 1.5 1.7 1.7 1.6
2009
7.3 7.8
10.3 8.4
9.3
Transaction Trends 4th edition |
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Is the European PE Industry Finally Recovering? Strongest quarter for European Private Equity buyouts since 2010 • Second highest quarter ever recorded in Germany with €9b • Mega deals driving value up with five buyouts over €1b in Q3 • Only two €1b plus deals in the UK so far this year As the deal pipeline starts to materialize, the European Private Equity (PE) buyout market saw a surge in deal values in the third quarter with 119 deals completed and €19.7b in value in Q3 2013, the highest value since Q4 2010 and up 129% compared with the €8.6b recorded the previous quarter. Deal volume was down by 8%, with 119 deals compared with 130 deals in Q2 2013, but as megadeals took center stage, the top five deals, with a combined value of €10b, accounted for over half the total deal value. This quarter also marks a significant return for the German PE buyout market, with deal value reaching €9b, the second highest German quarter recorded, since Q1 2007 and €9.4b and almost double the UK’s €5.1b deal value. Germany is the first market to really threaten the UK’s longstanding leading position, according to the latest data published by the Center for Management Buyout Research (CMBOR), sponsored by EY and Equistone Partners Europe.
Q3 sees five buy-outs over €1b, while mid-market deals continues to slow down The top four deals originated from Germany – taking a 60% share of the largest top 10 deals. The Springer Science & Business Media (€3.3b) was the largest buyout of Q3 2013 and is likely to be the biggest buyout of the year, followed by Ista (€3.1b) and Douglas Holding (€1.5b). In Q3 2013 we have seen a real slow down in lower mid-market deals (€25m to €100m). Only 26 deals equating to €1.4b completed, compared with 24 deals and €2.4b recorded the previous quarter.
UK market losing ground in deal values Despite a 64% increase with €5.1b (47 deals), recorded in Q3 2013 from €3.1b (45 deals) in the previous quarter, the UK’s PE buyout market remained relatively slow. While deals in €500m-1b range increased, it was surprising to see only two €1b plus deals so far this year (Vue Entertainment and B&M Retail). Although the UK continues to deliver a fairly consistent performance in terms of deal volume, its low levels of mega-deals has left it in danger of trailing behind in terms of deal value.
6
| Transaction Trends 4th edition
EY commented that: “This low level of mega-deal activity in the UK is somewhat of a conundrum – the capital and debt markets are healthy and the UK has access to some of the best leveraged finance in Europe, which should result in more deal activity at this level. With strong competition for assets from corporate buyers, PE houses may be finding themselves unable to compete for these highvalue assets. The recent Lucozade Ribena deal is a clear example where a strategic corporate buyer was successful despite strong interest from PE.”
PE houses return capital to investors The combined value of exits and refinancings so far this year continues to outstrip the value of new deals in Europe. There have been 276 exits, with a combined value of more than €51b recorded so far in 2013 and over €31b worth of refinancing. This represents good news because private equity houses are divesting their portfolio companies and are able to return capital to their investors and banks ahead of making new investments and raising new funds. It has been clear for some time that the backlog of exits necessary to free up investment resources was weighing on the European buyout market. We are starting to see this overhang clear and continuing exit activity will help the buyout market return to growth.
“It is also encouraging to see the deal pipeline still growing and a number of deals should complete this year”
-EY
There was a big increase in the debt to equity ratio in both UK and Europe. In €100 million plus deals, the contribution of debt is the highest since 2007; many larger deals are being done with 60% debt, bolstered by new, non-conventional players entering the market. Overall the market activity benefited from a combination of a freer debt market and more equity funding available.
Number of PE exits by exit route 2005 Source: EY data, n=527
120
100 1 20
No. Exits
100
Unbalanced picture in Europe
80 52
60
6 20
40 20 0
While Germany is currently the shining light in Europe, this activity is not representative of Europe as a whole, with the French buyout market, for example, being particularly weak when compared to the healthy levels of activity seen in 2011. Activity in France was driven by two main deals: SMCP/Sandro/Maje/Claudie (€650m) and Maisons du Monde (€650m).
95
85
4 30
28
37 3 12
60
51
25 2005
22 2006
2007
2008
PE
Trade
IPO
32 20 1 9 2 2009
65
7 5
13 10 12
33
61 10 3 25
40
30 2010
2011
23 2012
Banks/Creditors
in the second quarter and rocketed in Q3 with €5.0b from 23 deals. Business & Support Services also saw a sharp increase from €1.2b (Q2 13) to €4.7b and 16 deals this quarter. Deal value in Manufacturing doubled from €2.0b to €4.0b.
Equally, Sweden experienced slow levels of activity and this is likely to be down to the cyclical nature of PE. From 2010 to 2012, there was lots of deal activity and PE will need to churn these assets in 2014 to 2016, as a result there has been a lull in activity. Norway has also experienced low levels of activity in Q3, contrary to the high levels of PE activity seen in Q4 2012 and Q2 2013.
Outlook
Sectors buoyed by mega-deal activity There has been little change across all sectors in terms of deal volumes but some stand-out deals have driven a significant pick-up in value – namely in the Telecommunications, Media and Technology (TMT) sector; Business & Support Services; and Manufacturing. Deal value in the TMT sector had picked up
EY concludes: “So far in 2013 European market conditions have meant that deal processes are both longer and more difficult and the low levels of deal completions have not always reflected market activity. As several key deals successfully completed this quarter, it feels like a more accurate reflection of what we are seeing in the market. “It is also encouraging to see the deal pipeline still growing and a number of deals should complete this year, particularly in Germany. However, whether this upsurge in activity means the European PE industry is back in full recovery mode remains to be seen but the signs are certainly positive.”
Portfolio of all PE - backed European businesses with entry EV of €150m+ Source: EY data 700
Entry EV(€ bn)
600 500 400 300
119
200 100
215
167
29 304
171
66
405
58
54
519
17
13
556
47
25
544
64
55
526
50
48
531
50
529
-
Transaction Trends 4th edition |
7
EY Transaction Advisory Services - Norway Contacts Vegard Stevning Head of Transaction Advisory Services, Transaction Support
EY | Assurance | Tax | Transactions | Advisory
[email protected]
+47 916 83 692
[email protected]
+47 917 97 625
[email protected]
+47 970 25 021
[email protected]
+47 905 66 778
[email protected]
+47 971 66 567
[email protected]
+47 917 86 481
Paul M. Larsen Transaction Support Bjørn Tore Foss Transaction Support Erik Haagensen Transaction Support Nils Kristian Bø Valuation & Business Modeling Bjarne Møller Valuation & Business Modeling Kjell Stenersen Lead Advisory / Stavanger contact
[email protected]
+47 982 06 678
[email protected]
+47 982 06 499
[email protected]
+47 948 76 945
[email protected]
+47 913 47 741
[email protected]
+47 917 86 479
[email protected]
+47 954 52 441
Merete Skage Transaction Support / Bergen contact Inger Lise Egeland Restructuring
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About this publication Transaction Trends is a quarterly publication that aims to identify trends in the Norwegian transactions market. Transactions covered in this publication are public and private transactions announced by the 500 largest Norwegian companies (DN500), defined as a transaction where either the buyer, target or vendor company is a Norwegian based company. Public transactions are defined as transactions where either the buyer, target or vendor company is listed on Oslo Stock Exchange. All other transactions have been classified as private. Domestic transactions are defined as transactions conducted within a national boundary, i.e. deals involving two or more incumbent nationals, while cross border transactions involve companies from at least two different nationalities. Deal values are presented on a 100% basis. Transaction Statistics are based on mergermarket/EY data. Public market data are sourced from S&P Capital IQ, Bloomberg and Oslo Stock Exchange. The Nordea Norwegian Bond Indices are rule based and cover a large set of domestically issued bonds, with clear outlined and pre-specified bond characteristics. Bond prices are based on traders best guestimate and aggregated calculations are market weighted. Transaction Trends is published by EY Transaction Advisory Services. For further enquiries, or to add your name to the mailing list for this publication, please send an e-mail to
[email protected].
Contact information Bjørn Tore Foss Tel.:+47 970 25 021 E-mail:
[email protected]
© 2013 EYGM Limited. All Rights Reserved.
This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for specific advice.
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