Daily News: November 22, 2013

Distressed Investing M&A Report: Investors Turning to Europe

Schulte Roth & Zabel announced key findings from its 2013 Distressed Investing M&A report, produced with Mergermarket and Debtwire, including that distressed investors, who have traditionally focused on M&A opportunities in the U.S., are increasingly taking advantage of the historically low valuations of target firms in Europe.

Based on a series of interviews with investment bankers, private equity practitioners and hedge fund investors in the U.S. and Europe, the report provides insight pertaining to their experiences with distressed M&A activity and their expectations for the upcoming 12–24 months.

SRZ partners Peter J.M. Declercq, Stuart D. Freedman, Adam C. Harris, Jeffrey A. Lenobel, David E. Rosewater and Sonya Van de Graaff contributed to the report, which is being released today at SRZ’s 2nd Annual Distressed Investing Conference. Rosewater, whose practice focuses on distressed investments and acquisitions, mergers and acquisitions, and private equity/leveraged buyouts, will present the study.

Harris, chair of SRZ’s business reorganization group and a member of the firm’s executive committee, said, “A steadily improving economy, coupled with a favorable financing environment, has resulted in a more limited range of distressed investment opportunities. Given the amount of money dedicated to this asset class, we expect prices to rise as a function of supply and demand.”

Additional findings from the report:

  • Interest rates will have the greatest influence on U.S. distressed asset valuations, according to 68% of respondents.
  • The political climate remains a top concern for 43% of respondents, but debt availability and rising interest rates have emerged as the leading factors affecting distressed pricing outside of the U.S.
    The biggest deterrent to pursuing distressed assets is the lack of predictability in terms of investment scenarios, according to 65% of respondents.
  • According to 77% of respondents, balance sheet restructurings remain the top targets for those purchasing distressed companies.
  • The high volume of M&A activity in the U.S. energy sector is a primary driver for many investors as 79% of respondents in the U.S. and 55% of respondents outside the U.S. cite this sector as most likely to see the best opportunities for distressed M&A transactions. Second to energy, the real estate sector is the most valuable industry to distressed investors.
  • Schulte Roth & Zabel is a full-service law firm with offices in New York, Washington, D.C. and London.

    Mergermarket is an independent mergers and acquisitions intelligence service, with a network of dedicated M&A journalists in 65 locations across the Americas, Asia-Pacific, Europe, the Middle East and Africa.

    Debtwire is a provider of actionable intelligence and research on fixed income markets across the globe.

    To read the entire report, click here.

    To read the entire press release, click here.