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Strategies & Market Trends : NEW Market Gems - Swing and Day Trades -- Ignore unavailable to you. Want to Upgrade?

To: Jenna who wrote (185)	5/24/2001 7:58:43 PM
From: puborectalis	Respond to of 1227

Don't be fooled by silent spring Watch out for a brisk autumn as M&A gains pace By James Kanter, FTMarketWatch.com 4:14:00 PM BST May 23, 2001 LONDON (FTMW) -- Scan both sides of the Atlantic for mergers and acquisitions and you might say it's been something of a silent spring. Go deeper News Alerts MarketPulse News Stories Europe US Global News by Email But there's every sign of a brisk autumn ahead. Analysts say the medium-term picture for M&A is robust, and renewed activity could give markets a boost in the second half of 2001. Banks, media groups - and in particular telecoms - could be in play as takeover targets. Resulting share-price volatility could open up opportunities for retail investors. "There are going to be many areas of business that are going to need to consolidate in the current environment of weaker revenue streams," Bijal Shah, global equities strategist at SG Securities in London told FTMarketWatch. "Some form of M&A activity will be the result and investors are likely to be very appreciative of enhanced share prices." Let's talk telecoms M&A Some of Europe's largest telecoms operators are likely to blaze the trail, trying to reduce their crushing debt-loads. Having paid €140 billion for third-generation mobile phone licences and facing a similar bill to build the network, major telecoms groups are having to face up to mergers and other ways to reduce debt they would never previously have considered. See more on telecoms M&A Upcoming asset sales are expected to include Yell, BT's [UK:BTA] [US:BTY] directory business. Deutsche Telekom [DE:555750] and France Telecom [FR:013330] intend to sell their 10 percent stakes in U.S. carrier Sprint [US:FON]. Dutch operator KPN [US:KPN] [NL:00908] alone has listed some 20 assets for sale to raise $4.45 billion. Meanwhile, BT and KPN may now be seeing sufficient improvement in the market to sell stakes in their mobile businesses, BT Wireless and KPN Mobile. France Telecom may come back to the market to reduce its stake in Orange [UK:OGE] [FR:007919] as well. "Already, you're finding that M&A volumes are far better than at the tail end of last year and from that perspective things have improved," said SG's Shah. "The immense rights issuance in telecoms market that's got away, as well as immense rate cuts we've seen, ought to help." M&A bankers lick lips High profile buying and selling in a hot sector like telecoms will be welcome news for bankers, who've seen their fees dry up with the end of the tech boom and its overpriced shares for merger currency. This could be good news for investors who've seen little speculative potential in the past few months. The value of announced M&A transactions in Europe has plummeted this year, dipping to $123 billion from $496 billion in the same quarter last year. That's a year-on-year drop of 75 percent, according to figures from Niall MacLeod at investment bank Schroder Salomon Smith Barney (SSMB). A big factor behind any upswing would be a rebound in the U.S. economy. Predator companies need to raise equity finance while their prey will want to see prices something like the old days before submitting to their fate. So an end to the bear market in the world's largest economy would help both hunter and hunted feel it's time to come out of hibernation. Already, the pan-European FTSE Eurotop 100 [UK:1883619] is up about 18 percent since late March, when fears over future earnings growth on both sides of the Atlantic pulled the index well below the psychologically important level of 3,000. Meanwhile there are ongoing trends in Europe's macroeconomic environment that are likely to drive the urge to merge, says SSMB's MacLeod. "Increased competition - from the single market, globalization and the single currency - continues to force European companies, many of which are still inefficient, to restructure and cut costs," MacLeod told investors in his latest research note. Hit the play button If the macroeconomic factors fall into place, the chemistry may also be right for a round of buying and selling in the media sector. Entertainment giant Vivendi Universal [US:V] [FR:012777] is expected to hit the acquisition trail to keep up with the formidable combination created by the merger of AOL with Time Warner [US:AOL]. In Britain, Carlton Communications [UK:CCM] is widely seen as merging with Granada [UK:GAA] once legislation is passed allowing for greater consolidation in the TV sector. See more on Granada and Carlton Meanwhile, RTL [UK:RTL], the pan-European broadcaster, and Telefónica [US:TEF], the Spanish telecommunications group, are believed to be exploring a media deal that would open the way into the Spanish market for RTL. Keeping an eye on Germany SSMB's MacLeod steers investors' attention to Germany, where it says the abolition of capital gains tax legislations from the end of 2001 should act as a catalyst for further consolidation in several sectors. He suggests there's more action ahead in the insurance and financial sectors after Allianz's [DE:840400] $24 billion acquisition of Dresdner Bank [DE:535000]. Dismissing fears that failure to adopt a Europe-wide takeover code could derail a general trend toward hostile bids across the region, MacLeod sees no end to the M&A wave. "Overall, the level of M&A activity has probably bottomed in the first half of this year, with a strong recovery in the value of announced deals likely in the second half," says SSMB's Niall MacLeod. "This should provide a second-half fillip to the market as well as potentially boosting earnings growth into next year." James Kanter is a reporter for FTMarketWatch.com in London.