Asian Buyers to Extend Global Recovery in Mergers Next Year, Survey Shows

Asian companies seeking to expand internationally may propel modest gains in mergers and acquisitions next year, extending the recovery that began in 2010, a Bloomberg survey showed.

There will be at least a small increase in mergers and acquisitions in 2011 after a 12 percent gain to $1.96 trillion so far this year, according to the Global M&A Outlook, which queried 1,030 investment bankers, research analysts, traders, portfolio managers and salespeople. Fifty-eight percent said the most active buyers would be based in Asia Pacific or Central Asia, followed by North America, the report found.

Asia and North America will have the most attractive targets for acquisitions next year, followed by Western Europe, the survey showed. Deals involving China have jumped in 2010, with Zhejiang Geely Holding Group Co. agreeing to buy Ford Motor Co.’s Volvo Cars unit for $1.6 billion in August. Bright Food Group Co., Shanghai’s biggest food and dairy company, is in talks to acquire vitamin retailer GNC Holdings Inc., people with knowledge of the matter said this week.

“You’ll see the developing world invest in the developed world,” said Stephen Bird, Citigroup Inc.’s co-chief executive officer for Asia Pacific. M&A in the region is set to increase because companies are “highly liquid,” debt is becoming cheaper and asset prices are at historically attractive levels, he said in a Dec. 7 interview.

Domestic competition is also expected to be a catalyst for global M&A next year, and market volatility will be the biggest obstacle, the survey showed.

Bright Food

Deals involving Asia Pacific companies have jumped 25 percent this year through November, surpassing Europe and making them the second-most active after North America, data compiled by Bloomberg show. There were more than 8,700 deals worth about $594 billion in Asia through Nov. 30, up from $429 billion in the first 11 months of 2009. The Americas accounted for $1.1 trillion of transactions in the period, up 12 percent from $979 billion last year, according to Bloomberg data.

Global M&A volume rose 12 percent in the first 11 months of the year, the data show. About 70 percent of survey respondents expect an increase in M&A volume next year, compared with 90 percent who anticipated a rise this year.

Equity Financing

Forty-four percent of those surveyed said equity will be the major source of capital for deal financing next year, followed by cash and debt. In last year’s survey, debt issuance was expected to be the main source of M&A financing.

Cross-border deals dominated with more than 8,100 transactions worth $945 billion announced in the first 11 months of 2010, a 41 percent increase from the same period last year, the data show. About 75 percent of the survey respondents favor such deals over domestic M&A.

Financial services was the most active sector during the first 11 months, with $329 billion of transactions announced, followed by energy with $300 billion, the data show. Energy may be the most active sector in 2011 as the industry consolidates, the survey showed.

Deals in Brazil in the first 11 months hit a 10-year high with more than $130 billion of transactions, the data show.

To contact the reporter on this story: Brett Foley in London at bfoley8@bloomberg.net

To contact the editor responsible for this story: Jeff St.Onge at jstonge@bloomberg.net.

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