What are the global prospects for growth in 2011?

An international cast of Grant Thornton corporate finance partners gathered in London recently – offering the perfect opportunity to grill them about activity in their sector and whether there is a growing appetite for M&A.

You can view the full set of interviews on Grant Thornton's Mergers and acquisitions: global prospects for growth video, or read on for a summary.

The video opens with news from Grant Thornton's International Business Report, which annually surveys more than 11,000 global businesses. After two years of unprecedented financial and economic turmoil, it reports that M&A activity seems to be reappearing on the corporate agenda. Is that true everywhere and what issues are facing buyers/sellers in the current climate?

THE US
Stephen McGee, Grant Thornton US, reports that "most businesses feel like the worst is over" and that confidence is growing. Bank finance is returning and credit is more available, which in turn is increasing competition for assets as equity players – "back with a vengeance" – are competing with trade buyers who have record amounts of cash on their balance sheets.

However, he notes that the key issue facing buyers and sellers remains uncertainty about the strength of the recovery, which is then reflected in pricing. In the face of "anaemic growth", many companies are seeking strategic growth through M&A or to lower costs, but cross-border transactions are still, by their nature, viewed as more risky.

EUROPE
Europe delivers some mixed views. Kai Bartels, of Warth & Klein Grant Thornton Germany, notes that companies have been "less defensive" since January 2011 and more confident about M&A with German companies looking to Eastern Europe, India and China and cross-border transactions growing in importance for all PHBs.

But Arnaud Limal, Grant Thornton France, says there is still doubt and it is mainly large groups, who now have easier access to bank funding, who are thinking of M&A overseas; for smaller players, there is still caution especially after doing the painful work of restoring the balance sheet over the past two years. On M&A, he says pricing is the big issue with buyers unable to stretch themselves and sellers needing to have realistic expectations of value.

In the UK, Stephen Baker talks about companies who have cleared their balance sheets now looking for transactions in order to access growth but that the most important thing is to find the right deal, and the right quality of asset to buy/sell. He adds that coping with diligence is also a factor with deals taking longer to put together, often with six to nine-month timelines.

There is a UK appetite for BRIC M&A but for inbound acquisitions, these buyers require more time and investment as they tend to be less driven by typical UK auctions processes and more by a longer, more structured, relationship-building process in order to get a deal on the table.

INDIA
Vikesh Mehta, Grant Thornton India, says that India was fairly well insulated from the global crisis, in part due to Indian corporates reliance on domestic markets. He reports a "very positive" climate with the private equity market becoming a strong driver of growth. In fact, he says, India has seen a clear shift in preferences away from traditional bank funding towards private equity investment.

There has been an "acquisition spree" in India with significant outbound cross-border acquisition activity occurring, as well as India's own domestic growth story. Again, with a lot of money chasing fewer investments, the key in the current climate is finding them.

ASIA
The good news is that there is a lot of interest in M&A from private equity, says Ken Atkinson, Grant Thornton Vietnam, but at the same time, Asia is entering a new phase of high inflation with governments introducing measures to control that.

He also notes high expectations by sellers in Asia who are optimistic about getting a good valuation for their business. Meanwhile, buyers are looking to areas rich in resources such as China, South America, Australia and the Middle East.

Grant Thornton corporate finance teams offer M&A, transaction services, valuations and capital markets advice in more than 60 countries. For further information, visit our Corporate Finance pages.