News International to Lead M&A Revival In 2014

2. M&A activity will be funded by existing cash resources, with 73% of company executives suggesting they would use cash on balance sheets to fund M&A growth within the next 24 months. 175 energy companies globally are estimated to have held $850bn in 2013 (a 13% increase on 2012)

3. Almost three in four executives (68%) see the changing regulatory landscape as a key driver of growth for their business

The findings also reveal that the shape of this renaissance will be more ‘strategic’ than in the past. 62% of respondents state they would seek joint ventures to fund new technology projects, and to tackle capital intensive developments (such as fracking), reflecting how company boards are seeking more long term partnerships.

Steven Bryan, corporate energy

partner at Hogan Lovells, said: “Our research shows that the energy sector will be a driver for the global M&A recovery, with the optimism of executives in the energy sector at a high level. Company executives are not only positive about

Beats Expectations

2013, it seems unlikely it can continue. The government recently announced a new fiscal package, including spending cuts, to pursue a 1.9% fiscal surplus this year as it seeks to fend off a ratings downgrade. At present, the country’s debt is only two notches above a junk rating. As a result, there would appear to be less scope for fiscal populism ahead of the elections in October next year, removing some support for growth. Without it, it is difficult to see where growth will come from in 2014.

Activity data so far this year has not been encouraging. Though we have seen improvement in

the manufacturing surveys, weakness is evident in services surveys, industrial production growth, and the central bank’s economic activity index. Meanwhile, consumption, the other driver of growth for much of 2013, is likely to struggle in the face of rising debt costs. Particularly worrying is the continued decline in investment. Though inflation has begun to respond to tighter monetary policy, with 350 bps of hikes now since April last year, interest rate hikes can only do so much to contain inflation in an economy with supply side problems, and Brazil will need investment to resolve its inflation problem in

the long run. Yet there seems little prospect of an investment recovery until after October’s elections.

The recent drought is also likely to cause higher food and

electricity prices in the coming months. We expect monetary policy to remain tight this year, as the central bank continues attempts to anchor expectations and re-establish credibility. To sum up, although this

GDP number has provided a pleasant surprise, nastier ones could lurk ahead.

(Comments from Craig Botham, Emerging Markets Economist at Schroders)

M&A and its past success, but have real confidence about the outlook for the future and the role that M&A can play in driving future growth.”

Matthew Williams, Global Co-Head of Hogan Lovells’

Energy Industry Group, said: “A distinguishing feature of the energy sector is the direct influence governmental policy and its implementation through regulation has in driving commercial activity. Whether that activity is as

a result of un-bundling or as a result of varying levels of subsidy for low carbon energy, both of which we are currently seeing at work in many European jurisdictions, the market reaction can be as immediate as it is material.”

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