January 2017
Lower levels of deal appetite amongst
the large corporates on the back
of a strong deal flow in 2016
The current Belgian M&A appetite is slightly lower than in
the first part of the year, with P/E ratios down 1.4% in December as compared to June 2016. The year-on-year decrease represents 8.7%, indicating a stabilisation of the analysts’ expectations in terms of Belgian M&A appetite in the
second half of the year. However, the decrease in appetite
is only observed for bigger corporations, as mid-sized and
smaller companies show a substantial increase in P/E ratios
(+10.0% and 12.2% respectively) in the last twelve months.
Larger corporations might still have been affected by the ongoing uncertainty in the stock markets after the Brexit and
the US elections, eroding the P/E muliples as corporate earn-
ings have increased amidst a growing economy.
The Net Debt/EBITDA ratios indicate a significantly higher
funding capacity for mid-sized and smaller companies, as
opposed to larger corporations which say their debt levels
increase over the period, possibly fostered by favorable lending
conditions in the market.
KPMG is proud to have supported
the largest number of deals in Europe
and around the world in 2016.
M&A Predictor for Belgian quoted companies
P/E
31-Dec-15
30-Jun-16
Net debt/EBITDA
31-Dec-16
31-Dec-15
31-Dec-16
31-Dec-16
31-Dec-17
% change
% change
31-Dec-16
30-Jun-17
31-Dec-17
A
B
C
C vs A
B vs A
C vs B
D
E
Top 20
companies
21,5x
19,9x
19,4x
(9,8%)
(7,6%)
(2,4%)
3,3x
3,8x
15,7%
Mid 20
companies
13,9x
12,8x
15,3x
10,0%
(7,6%)
19,1%
1,1x
1,0x
(7,7%)
Smaller
companies
11,7x
11,9x
13,1x
12,2%
2,2%
9,8%
2,9x
2,5x
(12,5%)
All
companies
21,0x
19,4x
19,1x
(8,7%)
(7,4%)
(1,4%)
1,6x
1,5x
(7,6%)
Source: CapitalIQ, KPMG analysis
What is KPMG’s M&A Predictor?
KPMG’s M&A Predictor is a forward-looking tool that helps
member firm clients to forecast trends in mergers and acquisitions. It looks at the appetite and capacity for M&A deals
by tracking and projecting important indicators 12 months
forward. The rise or fall of forward P/E (price/earnings) ratios
offers a good guide to the overall market confidence, while
net debt to EBITDA (earnings before interest, tax, depreci-
ation and amortization) ratios helps gauge the capacity of
companies to fund future acquisitions. The Predictor covers
the ratios for Belgian stock quoted companies. Companies
for which earnings estimates are not available are excluded
from the data set, in addition to outliers. Companies are
divided in 3 groups (Top 20, Mid 20 and Smaller) based on
their market cap as at 31 December 2016.
© 2017 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with
KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other
member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
“Private Equity firms are driving up the
pricing of companies.”
Given the low interest rates, institutional investors, such as
pension funds, have allocated more of their investments to
private equity. In turn, this has led to increased funds (“dry
powder”) within Private Equity firms for their investments.
Combined with a lower expected return for the institutional
investors, we see increased appetite from the private equity
community to buy companies.
M&A appetite for Belgian companies
M&A capacity of Belgian companies
4,0x
25x
3,5x
Net debt/EBITDA
Forward P/E
20x
15x
10x
3,0x
2,5x
2,0x
1,5x
1,0x
5x
0,5x
0
0
Top 20
companies
31/12/2015 - 31/12/2016
Mid 20
companies
Top 20
companies
Smaller
companies
31/12/2016 to 31/12/2017
30/06/2016 - 30/06/2017
31/12/2015 - 31/12/2016
Mid 20
companies
Smaller
companies
31/12/2016 - 31/12/2017
Source: CapitalIQ, KPMG analysis
Source: CapitalIQ, KPMG analysis
Forward P/E multiples have increased in the second half for
small and medium-sized companies (respectively +19.1%
and +9.8%) as opposed to a slight decrease for larger
corporations (-2.4%).
While the overall funding capacity improved, we observe
mixed results for the different company sizes. Analysts
estimate the funding capacity to be slightly decreasing for
Top 20 companies, while it would be improving for Mid 20
and smaller companies.
Deal execution continues to gain momentum
120
The graph to the left shows trailing statistics for worldwide completed deals involving Belgian bidders. Towards
the year-end 2016 we observed an increase in closed
deals, reflecting a lagging effect of deals already in the
market earlier in the year, in addition to certain sellers
pushing for a closing before the year-end.
80
60
Number of deals
Dec. 2016
Nov. 2016
Oct. 2016
Sep. 2016
Aug. 2016
Jul. 2016
Jun. 2016
May. 2016
Apr. 2016
0
Mar. 2016
20
Feb. 2016
40
Jan. 2016
Number of deals
100
Source: MergerMarket, KPMG analysis
kpmg.com/Predictor
kpmg.com/socialmedia
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor
to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be
accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.
© 2017 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with
KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other
member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
M&A PREDICTOR | 2