Forced to the Altar

This year's big deals could transform their industries.
Tim BurkeFebruary 2, 2009

Don’t count deal-makers out. Credit may have dried up and the appetite for the “mega deal” sated, but companies still expect some notable transactions to take place in the coming months — even if against their will.

In December, UBS and the Boston Consulting Group questioned 164 European executives about the outlook for deal-making this year. A majority expect takeovers as a result of forced restructuring in sectors under pressure. Some of these deals could be big — almost half of respondents expect at least one “transformational deal” in their sector. In mining, for example, the curtailed deal between BHP Billiton and Rio Tinto was hampered only by timing, the report says, and remains “an ideal combination.” Other possible takeovers include long-expected, oft-denied mergers between truck companies MAN and Scania, and French conglomerates Areva and Alstom. (See “Big Deal” at the end of this article.)

And what about private-equity firms? Though hobbled, they’re not completely out of the picture. In December, for example, the UK’s ECI Partners raised £430m (€473m) for a new fund amid extremely hostile financing conditions. Still, the UK’s Centre for Management Buy-out Research says that private-equity activity fell to its lowest level in 13 years in the fourth quarter of 2008. Corporate buyers are likely to lead the way in any M&A recovery this year, whether they like it or not.