This will be a notable year for international mergers and acquisitions, say experts who participated in a recent teleconference on the outlook for 2007 sponsored by M&A International Inc.
``We seem to be in a virtually perfect environment,'' said Mark Lerner, vice president for the Asia-Pacific region for M&A International, an organization of independently owned corporate financial advisers.
``Record levels of funding are expected to be invested, no recessions are in sight, and in the U.S., there's even talk of beginning to see a small drop in interest rates, and Chinese and Indian companies are beginning to accelerate their international expansion by developing global acquisition strategies,'' Lerner said. ``Confidence levels around the world remain high and interest rates remain low, all pointing to another record level of mergers and acquisitions in 2007.''
In the teleconference, Lerner and three other speakers said foreign firms with a hunger for expansion are looking to acquire companies in North America and, conversely, North American companies are reaching across both oceans to beef up their businesses.
Because 2006 was an unprecedented year across all sectors and regions, activity might be slightly down in 2007, said Henry Gibbon, editor in chief of Acquisitions Monthly, a London-based magazine.
``We've been in a period of sustained growth for a number of years now,'' he said. ``I think the concern will be whether we'll be able to continue that into 2007.  was a uniquely busy year for mergers and acquisitions in Europe and Asia. Energy and infrastructure were the most prominent sectors in 2006 and we anticipate also in 2007.''
Several factors will be driving the activity in 2007, including strong corporate balance sheets, liquidity in debt markets and competitive interest rates.
``We hear mostly from bankers and chief executives a degree of fundamental confidence about the market moving forward, and that's certainly our expectation for the year ahead,'' Gibbon said.
In Europe, a stable and improving economic framework makes it ripe for activity, said Attilio Arietti, vice president of M&A International Inc. in Europe. Consolidation remains a trend across industrial sectors in Europe.
``I do see quite a positive outlook for the market in 2007 in Europe,'' Arietti said during the Jan. 16 conference call. He focused on the favorable dollar-to-euro exchange rate, and growing activity by strategic and financial acquirers in the region.
``In general, as far as macro-economic framework, there's strong economic growth in most European countries, low interest rates, good operating earnings, low corporate default rates and above-average liquidity,'' he said.
Germany is closing a great 2006, putting an end to a five-year period of mediocre growth.
``[Germany's gross domestic product] grew by 2.5 percent, compared to an average of 0.6 percent over the last five years,'' Arietti said. ``We trust that the dollar vs. euro rate of exchange will remain stable. The U.S. economy is poised for a soft landing and the dollar should not weaken further. ... It's a very reassuring picture.''
Japan will experience a record level of deals, Lerner said.
``Japan has only recently come out of a 12-year recession,'' Lerner said. ``We believe there will be significant growth in the private equity sector in Asia in 2007. Private equity firms that have traditionally played in Europe and the United States will look to acquire in Asian countries.''
In South Korea, there's an increase in domestic M&As, and Korean-based firms are looking to acquire outside the country. In China, there's not strong activity yet because of foreign exchange controls. One of the best markets will be India, and there is a strong rise in Indian companies looking to make acquisitions.
In North America, the trend will continue for in-bound purchases from foreign acquirers and out-bound buys from firms based in North America, said Scott Hardman, Americas vice president for M&A International. Hardman is working on five deals in which North American firms are looking to acquire in Europe and seven in which European firms are looking to acquire in North America.
``That is a significant part of our business and significant part of the deal flow in general,'' he said.