Global Mergers and Acquisition Activity and Trends

Global Mergers and Acquisitions activity hit a 3 year low during Q2 of this year.  Through June 25, there had been $978.8 billion of announced M&A activity in 2013.  This represents a 9% decrease from the same period in 2012. “Most of that drop came in Q2, where the $470 billion of volume represents an 8% decrease from Q1 2013 and more than a 28% fall from Q2 2012. In fact, this is shaping up to be the slowest quarter since Q3 2009.” (Primack)

Although U.S. activity fell by 16% in Q2, it continues to remain positive to the tune of nearly 34% for the year.  This accounts for over 50% of the total global M&A activity in 2013, with $437.1 billion thus far.  Meanwhile, as Europe’s economy continues to remain sluggish, M&A activity is lagging and has fallen by another 43% so far this year. (Primack)

Source: Thomson Reuters

So far in 2013, the average debt financing multiple is 6x EBIDTA for buyouts – currently higher than the 5.5x in the whole of 2012.  The average Enterprise Value (EV) to EBITDA multiple stands at 7.5x which is lower than the 8x seen for the end of 2012. (Mergermarket Private Equity Report: H1 2013)


Source: Mergermarket

The overall pickup of exits in Q2 failed to match that of Q2 2012 where deals valued at $101.3 billion set the bar high. Compared to last year, this years’ Q2 was down 32.3% by value. The Exits EBIDTA multiples shrunk to 11.5x so far in 2013 – a multiple hasn’t been lower since 2004 at 11.1x.  This further highlights the reasons why firms are cautious about exiting.  Meanwhile, following the continued distress in Europe, this region was knocked the most with a decline in EBITDA multiples to 11.4x in H1 2013 compared to 16.2x in the whole of 2012. (Mergermarket Private Equity Report: H1 2013)


Source: Mergermarket

Opportunities in the CIS

The CIS experienced the highest year on year growth, with deals targeting CIS assets in the mining and metals industries up 543%, a total value of $23.9 billion. The majority of this increase came from consolidation within the region. In the potash sector, Silvinit and Uralkali merged to create a single national champion and one of the largest controllers of potash in the world. Another deal of note in the region was the merger between Russia’s leading gold producer Polyus Zoloto and its subsidiary KazakhGold, making it a top ten gold player. (Mergers, acquisitions and capital raising in mining and metals)


Source: Ey

Also, there has been a recent trend in Russia of increased consolidation in the soft drinks sector.  Although the risks remain high, international bidders continue to be interested.  Coca Cola and Nestle have both made acquisitions and according to industry experts it is highly likely for this upward trend to continue into the near future.

Armenia’s M&A Ranking and Outlook


Despite being a landlocked country with two closed borders, the Armenian economy continues to grow around 4% per year and is becoming increasingly sophisticated with regard to the depth of her capital markets (see Caucasus Growth Fund).  According to the Venture Capital and Private Equity Country Attractiveness Index, Armenia now ranks 88th overall, up from 92nd overall in 2012.  Armenia currently ranks 13th according to this same index for ease of starting and running a business and 22nd for its debt and credit market.  Continuing to provide increased entrepreneurial tax incentives and decreasing the administrative burdens facing businesses will only accelerate Armenia’s assent up these rankings. (Groh)


Financing of investment by owners’ contributions or by issuing equity increased to 28 percent, making Armenia the country with the highest equity financing of investment in all of Eastern Europe and Central Asia (ECA).  (Running a Business in Armenia)

IFC’s Strategy in Armenia

The IFC's priorities in Armenia are to assist small and medium businesses with their development and hence increase employment opportunities, to assist them in improving risk management procedures and to promote energy efficiency in order to increase these local companies’ competitiveness. (IFC in Armenia)

Through a combination of investment and advisory services, the IFC is:

  • Contributing to the growth of financial intermediation to expand access to finance to small and medium enterprises
  • Helping tap Armenia’s renewable energy potential and increase energy efficiency in the economy
  • Promoting reforms to improve the business environment

Supporting sustainable business practices at local enterprises

International Finance Corporation (IFC) & Black Sea Trade and Development Bank Invest in Armenia


The development finance group IFC (see IFC’s Strategy in Armenia) has recently partnered with the Black Sea Trade and Development Bank (BSTDB) to invest in the Armenian fruit juice company Euroterm.  IFC and BSTDB will provide loans to Euroterm in the amounts of $2.5 million and €2.05 million respectively.

This will be the first investment by the IFC in Armenia’s agricultural sector and will serve to increase the livelihood of many farmers as production increases, especially those in the Armavir and Kotayk regions who provide the company with organic fruits and vegetables.

In addition to providing long-term debt financing, the IFC will be assisting Euroterm in implementing “a food safety management system based on international standards to help increase the company’s competitiveness, sales and exports.” (IFC Inks First Investment in Armenia’s Agribusiness Sector)  This project is also being financed through Austria’s Ministry of Finance.

Armenia has been a member of the IFC since 1995.  To date, the IFC has invested $244 million in 40 projects across numerous sectors of the Armenian economy, including the financial, manufacturing and mining sectors. (IFC Inks First Investment in Armenia’s Agribusiness Sector)

Caucasus Growth Fund

“International financial institutions such as the European Bank for Reconstruction and Development (EBRD), the International Finance Corporation, a member of the World Bank Group (IFC), the Netherlands Development Bank (FMO) and the Black Sea Trade and Development Bank (BSTDB), teamed up to support small and medium businesses in the Caucasus by investing in a new private equity fund.” (Caucasus Growth Fund Important Step for Development of Equity Capital Markets in Armenia)

The establishment of the Caucasus Growth Fund is another major step forward for the development of Armenia’s equity capital markets.  The newly-established fund is managed by Small Enterprise Assistance Funds (SEAF) and to date has raised $42 million for investments in the Caucasus. 

The availability of private capital is critical for the maintenance of a vibrant, active and self-sustaining capital market.  This fund will provide many new prospective startups and entrepreneurs in Armenia an opportunity to gain access to much need capital and knowledge from internationally acclaimed institutions. 

According to Esben Emborg, the Managing Partner of SEAF Management, “the fund is flexible and could invest in almost any business sector.  The investment target will be $500,000-$5 million in each company repayable in 5-7 years.” (Caucasus Growth Fund Important Step for Development of Equity Capital Markets in Armenia)

SEAF is a global fund manager with a proven history of developing local fund management capabilities and providing growth and expansion capital to small and medium companies in emerging markets in Eastern Europe. (Caucasus Growth Fund Important Step for Development of Equity Capital Markets in Armenia)

  Three Billion Dollar Rail and Road Project Gains Investor Interest 

The Dubai based Rasia FZE along with their partner Caucasus Railway recently signed a deal with Armenia's Ministry of Transport and Communication to build a rail-and-road corridor that will link the ports of the Black Sea to the ports of the Gulf.

This ambitious construction project will connect the town of Gavar, near Lake Sevan, to the city of Megri, which lies on Armenia’s southern border with Iran.  The Southern Armenia Railway is anticipated to be a 316 kilometer electrified single track railway.

The Southern Armenia High Speed Road, being built in the southern province of Syunik, is set to be a 110 kilometre long expressway connecting the town of Sisian to the southern border of Armenia by Meghri. (Armenia's Big Economic Push)

Having already recruited China Construction Company Ltd. to build the project, Rasia hopes to “boost potential local and international transit freight volumes by investing in the development of mineral and agricultural projects along the Corridor.” (Armenia's Big Economic Push)

This three billion dollar project is a major endeavor for Armenia, a landlocked economy with a ten billion dollar annual GDP.  However, Armenia is by far the most market-oriented and free economy in the region and there is no reason to believe that Armenia will not continue to benefit from these type of private-public partnerships in the future. (Armenia's Big Economic Push)

Macroeconomic Data for Armenia

The Armenian economy grew by an impressive 6.2% figure in 2012, bouncing back from a severe 14% decrease in GDP in 2009.  The global financial crises and stagnant European economy, Armenia’s largest trading partner, make this feat all the more impressive.

“The World Bank estimates that the Armenian economy grew by around 6.6% in the second quarter on the back of manufacturing and mining sectors, which rose 8.5% and 22.1%, respectively.  Construction sector also fared well, rising 2.8% in the second quarter -- its first gain since the first quarter of 2011.” (Armenia's Big Economic Push)

 Armenia’s Economic Outlook

According to the World Bank in a recent report, the Armenian economy faces numerous downside risks as economic uncertainties loom.  The economic outlook is heavily dependent on future developments within the Eurozone “that may transmit to Armenia through trade, banking, and foreign direct investment (FDI) channels, as well as international prices for food and base metals.” (Armenia's Big Economic Push)  The Armenia economy would greatly benefit if it were to gain accession status or even agree to new comprehensive free trade and integration agreements with the European Union.

The European Bank for Reconstruction and Development has applauded the authorities for deregulating the economy and establishing frameworks for increased competition and improved legal and economic frameworks such as fairer business regulations and stronger property rights.

For example, the EBRD cited the approval of a new mining code in Armenia in its assessment of the country.  “The new code is expected to improve the investment environment in the sector and lead to greater revenues over time, as taxation of the sector will be more closely tied to the sale of ores rather than reserves." (Armenia's Big Economic Push)  Furthermore, the government is actively attempting to stimulate the capital market and tighten banking regulations.

The IMF says that the banking sector "remains robust," despite the fact that dollarization of both deposits and credit remains high, creating a source of banking system vulnerability.  In its Article IV assessment of the country on Feb. 5, the IMF confirmed that credit to the private sector remains strong in the country, especially in foreign currency.  Also, despite substantial increases in credit growth in recent years, the ratio of credit to GDP in Armenia remains relatively low compared to the developed economies. (Armenia's Big Economic Push)

The EBRD has outlined three key priorities which they believe the Armenian authorities face in 2013, which include:

1)      Making a "breakthrough" in reinforcing the business ecosystem. Emerging economies often undertake a number of positive measures but regularly fail to implement or altogether end up abandoning these policies.  

 2)      Improving domestic and international trade.  This is partially dependent on improving the overall infrastructure of the country and continuing to develop and modernize the economy as a whole. Thus, the aforementioned three billion dollar railway and road initiative will have a significant impact towards improving the country's transportation network and facilitating increased trade with the rest of the world.

3)      Supporting the development of capital markets.  According to the EBRD, "the ambitious de-dollarization agenda should be supported by a consistent shift of the monetary policy framework from de facto peg to inflation targeting.  The upcoming pension reform should serve as a strategic opportunity to develop domestic markets for government securities, bank deposits and equities through an active institutional investor base providing steady demand for long-term investments." (Armenia's Big Economic Push)


 Works Cited

"Armenia's big economic push." 14 Feb. 2013. Zawya. 17 July 2013 <>.

"Caucasus Growth Fund important step for development of equity capital markets in Armenia." Caucasus Growth Fund important step for development of equity capital markets in Armenia. 4 Apr. 2012. Arka News Agency. 16 Aug. 2013 <>.

Groh, Alexander, Heinrich Liechtenstein, and Karsten Lieser. "The Venture Capital and Private Equity Country Attractiveness Index." The VCPE Country Attractiveness Index Armenia Comments. 2013. IESE Business School. 18 Aug. 2013 <>.

"IFC in Armenia." Europe, Middle East & North Africa. 2013. International Finance Corporation. 17 July 2013 < middle east and north africa/ifc in europe and central asia/countries/armenia country landing page>.

"IFC inks first investment in Armenia’s agribusiness sector." AltAssets Private Equity News RSS. 27 May 2013. AltAssets. 18 Aug. 2013 <>.

"Mergermarket Private Equity Report:H1 2013." 5 July 2013. Mergermarket. 18 July 2013 <>.

"Mergermarket Spotlight: Russia." 21 Dec. 2012. Mergermarket. 16 July 2013 <>.

"Mergers, acquisitions and capital raising in mining and metals." 2012. EY. 17 July 2013 <>.

Primack, Dan. "M&A activity hits three-year low." CNNMoney. 28 June 2013. Cable News Network. 16 July 2013 <>.

"Running a Business in Armenia." IFC/World Bank. 19 July 2013





The CIS experienced the highest year on year growth

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