Global M&A Valuation: Highlights and Outlook

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American Appraisal Introduces Global M&A Valuation Outlook Report

Today’s M&A landscape presents dealmakers with many challenges - political turmoil, debt crises, legislative uncertainty and more. Pursuing the right deal, in the right way, is crucial.

In a volatile and uncertain economic environment, how can corporate dealmakers try to get a handle on the value of acquisitions and divestitures? How can acquirers minimize risk and avoid post-acquisition complications? Conversely, how can sellers maximize returns and rely on valuations of their businesses?

Today’s M&A landscape presents dealmakers with many challenges - political turmoil, debt crises, legislative uncertainty and more. Factors affecting financial markets vary by region, yet all markets are volatile; in addition, certain industry sectors remain fiercely competitive while activity in other sectors falters. Pursuing the right deal, in the right way, is crucial. Where do dealmakers turn for objective, independent analyses and innovative valuation solutions?

American Appraisal’s experience provides unique insights into the valuation assumptions inherent in M&A transactions throughout the world. The firm unearths and evaluates the most salient trends in global M&A valuations, providing clients with thoughtful, forward-looking analyses and advisory. American Appraisal now leverages this knowledge and experience by introducing the Global M&A Valuation Outlook.

Published in association with mergermarket, the Global M&A Valuation Outlook provides in-depth analysis of global M&A valuation trends based on more than 25,000 valuation data points from transactions across 28 countries. Research compiled over the past two years provides critical insights into the M&A valuation landscape around the world - its evolution during recent years, considering the recent economic crises, as well as current trends and their potential impact going forward. Some key findings follow.

Nearly all regions experienced declines in deal volume and value in the first half of 2012 – some more striking than others. Over the first half of 2012:

  •     The United States, the world’s largest M&A market, exhibited the most dramatic declines, significantly influencing the 18% volume and 31% value reductions in the Americas overall. Falling commodity prices further contributed to the declines.
  •     Asia-Pacific’s deal volume decreased by 32% and its total deal value decreased by 14%.
  •     Europe’s deal volume and value declined 27% and 21%, respectively. Considering the region’s unprecedented liquidity crisis, this represents a remarkable resilience. However, as the sovereign debt crisis continues to hamper capital-raising conditions, additional pressure is expected in the M&A landscape.

The news is not all bleak, however:

  •     Central and South America experienced increases of 14% (volume) and 8% (value) between the first and second quarters of 2012, reflecting global companies’ desire for growth in emerging markets.
  •     Average acquisition multiples in the technology, media and telecom sector nearly doubled from 2010 to 2011. Innovation, demand shifts and social media growth gave rise to high acquisition premiums and drove up valuations in this sector.
  •     Although Asia-Pacific M&A markets witnessed declines in deal volume and value, valuations held firm, with median EBITDA multiples rising from 7.9x in the fourth quarter of 2011 to 9.6x in the first half of 2012.
  •     Creative solutions are being implemented to bridge buyer-seller valuation gaps, particularly in the United States and Europe. These solutions include contingent considerations and earn-outs, which allow sellers to achieve a full valuation and prevent buyers from potential overpayment. According to Nancy Czaplinski, Managing Director, “Many of the deals I’ve worked on have included earn-outs, with more and more buyers now effectively waiting to see if sellers’ EBITDA projections are realized, and then rewarding them accordingly when they are.”
  •     In efforts to pre-empt costly post-acquisition mistakes, buyers are paying close attention to the tax implications of deals. Assessment of transfer pricing issues has become a key feature of any thorough due diligence process or during M&A planning. Richard Siladi, Managing Director, says, “Clients are taking acquisition matters one step further now. Going beyond just the financial and tax reporting aspects of a transaction, they are increasingly cognizant of the symmetry between purchase accounting and post-acquisition transfer pricing and our ability to help them.”

Going forward, it is expected that:

  •     Better-quality target companies will become available as companies look to divest non-core assets.
  •     In the Americas, larger companies across all sectors may look to acquire their smaller peers, while smaller companies restrained by the difficult financing environment may look to sell.
  •     In Europe, the M&A landscape will be under serious pressure, with buyer uncertainty rising and sellers waiting for improved conditions. In addition, divestitures and privatizations could present lucrative opportunities for strategic acquirers.
  •     Outbound and cross-border M&A activity will remain healthy, particularly in certain Asia-Pacific areas including China and India.
  •     Overall, dealmaking will continue throughout this period of economic and political adjustment, with buyers maintaining more awareness of downside risks.

Joseph Zvesper, American Appraisal’s Chairman & CEO, commented, “The next 12 months will bring renewed challenges, including increased investor scrutiny and continued market volatility. In addition, ongoing political turmoil across key markets will continue, adding layers of complexity and risk to deal making. The benefits of using a range of tools to help improve efficiency and mitigate risk are abundantly clear. Developing creative solutions to the particular regional- and sector-specific challenges will be of vital importance as we assist our Clients in navigating this challenging economic environment.”

American Appraisal, the world’s only truly glocal valuation firm, is a leading valuation and related services firm that provides expertise in all classifications of tangible and intangible assets. It comprises 900 employees operating from major financial cities throughout Asia-Pacific, Europe, the Middle East, and North and South America. For more information, visit

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Laura Brophy
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