·        Deal value globally 50% higher than H1 2013; highestpoint since M&A boom in 2007

·        Deal volume remains flat as companies opt for qualitynot quantity

·        Next 6 to 12 month provide ideal window of opportunityfor further transformational deals

LONDON, KYIV, 19 August 2014. Thevalue of global M&A conducted in the first half of 2014 hit US$1.7t and isnow at its highest since the deal boom before the global financial crisis. Incontrast, the level of activity remains low as flat deal volumes globally showthe trend for fewer, bigger deals continuing, according to data released todayby EY[1].

Market conditions should continue to foster thistrend making the next 6 to 12 months an ideal window of opportunity to do transformativedeals. Strong fundamentals for deals continue: high equity valuations, lowinterest rates and cheap debt, as well as strong cash piles provide a highlyfavorable environment for deal-making.

Investor sentiment is also supportive to boldacquisition strategies as the hunt for high-quality intellectual property andbrands continues with businesses searching for growth in a low- growthenvironment. All of which will continue to foster high-value deal-making.

PipMcCrostie, EY’s Global Vice Chair, Transaction Advisory Services says: “Theseideal conditions for transformative deals will not last forever. Interest rateswill rise, equity values will move and the competition for high-quality assetswill only become more intense with private equity actively increasingly in themix. Leading companies will look to do smart and strategic M&A before thecurrent deal climate changes, so we can expect more large, headline-grabbingacquisitions to come.”

UKRAINE:preparing for the recovery

Unfortunately, Ukraine was not following global M&A trend due toobvious reasons – political instability and on-going unrest in Eastern regions,they are not the best environment for making any investments.

VladyslavOstapenko, Head of Corporate Finance and M&A, EYUkraine: “Dealmaking in Ukraine become much more difficult, but not impossible –for example EY successfully closed a fund-raising deal in December, 2013 forPortmone.com and sell-side mandate in July, 2014 for the local company whichdisposed its pig breeding complex to a Ukrainian entity controlled by several Europeaninvestment funds and specializing on pig breeding. We are also working on twomore buy-side M&A projects where our clients are foreign corporations. Theseprojects are actively progressing despite all negative issues, however,majority of other investors are anticipating the political situation in Ukraineto calm down before making any investments.

We believe that Ukrainian M&A market will be driven by 3 majorfactors:

·        Willingness to sell the business because ofimpossibility to control it due to the change of political elites;

·        Willingness to buy Ukrainian assets at the bottomof economy and capitalize it on prospects of growth due to the new political,economic and other trends as well as prospects of the EU integration;

·        Ability of strong Ukrainian corporations to getaccess to additional financing and use it as a war chest for M&A andfurther organic expansion.

“We see that interest in Ukrainian assets is rising and the number ofinquiries on potential acquisition or partnership targets are increasing.Investors start doing their homework on industry research and preliminaryselection of the best targets to contact as soon as the situation is back to normalagain. This is a good sign which hopefully can be converted into more deals andinvestments into Ukrainian economy”, adds Vladyslav Ostapenko.

2014 – the M&A story so far

The 50%increase in deal value in 2014 compared to the first half of 2013 has seen thenumber of US$1b+ deals increase by 35% as companies engage in bolder M&A.Global deal volumes continue to flatline after years of falling activity.However, recent modest increases in deal volume in the US market (up 7.5% inthe second quarter on 2013), might point to a future resuscitation of dealvolumes globally.

Says Mrs. McCrostie: “Value not volume has been making headlines in 2014. M&A malaise hasenveloped the market for many years and in 2014, companies and boards have optedfor quality rather than quantity when it comes to deal-making.

“Thereare some hopeful signs of a return of M&A globally in terms of the numberof deals. However, companies are still navigating a very complex set ofchallenges. Geopolitical issues, modest – and fragile – economic growth andincreasing shareholder activism is ensuring that managing costs and deliveringmeasured and sustainable growth remains a permanent feature of this complexbusiness landscape. Within that context, we should only expect a modestincrease in deal volume globally in 2014-15.”

Maturemarkets writing M&A story

Themature markets are driving the M&A story in 2014. In terms of deal value,the top five target countries for assets are: the US, UK, France, Netherlandsand Australia. In terms of acquirers, the top five countries are: the US,Canada, Switzerland, UK and China.

Interms of volume, the mature markets are dominant. The top five target countriesfor assets are: the US, UK, Germany, Canada and Australia. In terms ofacquirers, the top five are: the US, UK, Canada, Japan and France.

“Aseconomic growth – albeit modest – returns to mature markets, companies arelooking at those economies as less risky options for investment and growth.Emerging high-growth and frontier markets will always be attractive in terms ofinvestment, but safe and secure modest growth is attracting the most investmentas the global economy moves into a new phase.”

Tech and telecommunications the hottest of many hot sectors

The value of deals in thetelecommunications sector more than doubled in the first half of 2014 with anincrease of 233%. Other sectors seeing large increases in deal value include:aerospace and defense (+186%); diversified industrial products (+136%); mediaand entertainment (+118%); asset management (+110%); and life sciences (+77%).

In terms of volume,technology was the only sector registering anything other than low single-digit percentage growth with a 12.5% rise in the number of deals in the firsthalf of 2014. The sectors seeing the largest falls in deal volume wereaerospace and defense and automotive (both -14%), life sciences (-13%) andbanking and capital markets (-11%).

Telecommunications,which saw the highest rise in terms of value, saw volume fall by 9% in 2014,further highlighting the established trend of fewer, bigger deals.

Outlookcontinues to be value not volume, quality rather than quantity

Thefirst half of 2014 is the fourth highest ever in terms of deal value – beatenonly by the first six months of 2007, 2006 and 2000.

McCrostieconcludes: “The first six months of this year has echoes of the M&A boomyears in terms of the size and value of deals. However, as we look forward tothe future, looking back to make boom-time comparisons might be misleading.Despite high-value deal-making in 2014, we are not experiencing a boom in termsof the volume of activity – far from it. Despite some encouraging signs fromthe US in the past quarter, low deal volume globally will likely be part of theM&A landscape for the remainder of 2014 and beyond as companies take highlyselective advantage of ideal conditions for big M&A.

“Wecan expect high-value headline-hitting M&A to continue with an increase inthe appetite for much larger deals as executives look to transformationalacquisitions to move the needle for  topline growth.”

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