SEPTEMBER 2014
Legal Expert Board
31
financing. In addition, conservative post- financial crisis financial policies have left many companies with significant cash reserves. To meet these changes in strategy and growth imperatives, companies are pursuing M&A transactions.
For example, in a field where I do a lot of work, U.S. health care legislation and regulation have changed market opportunities in the healthcare industry and have been a significant driver of deal activity.
My partner, Mike Froy, Chair of our U.S. Corporate practice, notes, “There is a near perfect storm of factors that, individually and together, are driving major M&A activity. Markets are increasingly dynamic and competitive, driving many businesses to continually refine, if not overhaul, their strategy.”
Significantly, total worldwide Assets Under Management in private equity funds
have more than doubled from 2007 to 2014, and the funds have much more “dry powder” than in 2007. Private equity funds that purchased companies prior to the financial crises may have been unable or unwilling to sell assets until valuations increased. With the current low interest rate environment and high acquisition demand, those valuations have increased and many private equity funds are at a point in their life cycle where exits are appropriate, which is driving increased divestiture activity by private equity funds. These high valuations, and the relatively manageable execution risk, make M&A an attractive alternative to IPOs as an exit strategy.
My partner Stephan Mallenbaum, our U.S. Corporate Practice Leader, adds, “There are simply more private equity funds which manage larger pools of capital to deploy, and a much greater willingness to look at less developed and emerging markets in order to source deals.”
Which deal over 2014 interested you most and why?
While there have been no shortage of megadeals, one transaction I find most interesting involved our own client Fresenius Medical Care, a German-based DAX30 healthcare company. While Fresenius is the world’s largest provider of dialysis services and products, it operates in a very dynamic industry and is implementing a strategy in the U.S. to address those market changes. In particular, Fresenius is seeking to expand the range of healthcare services it provides. Shortly after acquiring an urgent care business, Fresenius acquired one of the leading hospitalists companies in the U.S., a relatively new and rapidly growing medical specialty. Regulated markets create a challenging
operating environment but smart players like Fresenius identify opportunities within evolving industries. Fresenius’ acquisition of Sound Physicians is emblematic of using cross border M&A to implement evolving
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