Despite the intense economic headwinds in the second half of the year, global middle market investment bank Robert W Baird believes 2012 will be a strong year for M&A.
Baird – which posted a record year of results in 2011, with investment banking revenues up 50 percent and employee numbers rising 17 percent – has predicted increased M&A activity for 2012, thanks to an uptick in economic indicators and significant improvement in the credit markets. Key determinants of success in 2012 include:
· Strategics Seeking Growth. Conditions are good for an increase in strategic acquisitions in 2012. M&A can be an effective tool for lifting the top line and generating margin improvement through synergies following an extended period of cost controls.
· Financial Sponsors Ready to Deal. Private equity activity is poised to build on the upturn of 2010-2011, as financial sponsors entered 2012 prepared to buy and sell assets due to pressure to put committed capital to work and to generate exits. At the same time, achieving fully valued realisations is a high priority for private equity firms with aging portfolio companies.
· Slow-growth Economic Environment. The M&A market should remain active in an anticipated environment of low economic growth, reflecting varied economic trends across geographic markets. Disparities in regional economies should drive growth for cross-border deals, as occurred in 2011.
· Robust Credit Markets. After stabilising in late 2011, the credit markets appear poised to provide sufficient liquidity for M&A financings in 2012. The leveraged loan and high yield markets should be accommodating for new deals, as these asset classes are an attractive alternative to historically low interest rates, especially with speculative-grade defaults expected to rise only modestly from low levels in 2012.
Against a backdrop of widespread investment banking layoffs and falling revenues, Baird achieved a record year in 2011 both in Europe and the US. Investment banking net revenues increased nearly 50 percent from 2010 and more than 40 percent from 2007 – the business’ previous record year. The firm also announced a record 72 M&A deals in 2011 – an increase of more than 40 percent over 2010.
In addition, Baird increased IB staff numbers by 17 percent in 2011, from 170 to 199, and added 9 Managing Directors and Directors.
David Silver, Head of European Investment Banking at Baird, predicts the next 12 months will be one of further growth and prosperity as Baird aim to expand further on their impressive 2011: “While many of our peers appear to have hiring freezes or are actively letting people go, Baird will continue to add talent in 2012. Having just completed a record year in the US and Europe, we are keen to continue adding senior talent in Europe where we see tremendous opportunity.
“Of particular interest to us will be seasoned, sellside-oriented bankers in London and Frankfurt, with deep private equity relationships and/or sector knowledge in our core areas of focus – Industrials, Business Services, Consumer and Technology. Our stability, private ownership, culture, clear strategy and strong momentum combine to offer a highly attractive and sustainable platform.”
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