One of the few points of consensus about the 2010 outlook among European investors is that organic growth opportunities will be thin on the ground. Most fund managers, it seems, would prefer to back a well-known management team with a clear acquisition strategy.
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"If a management team has successfully executed a buy-and-build strategy, it may be possible to get blind funding for acquisitions but there is not a lot of trust out there" Rupert Mitchell, Jefferies International |
"There was a definite shift in investor appetite towards growth financing in the US at the tail end of May. European investors have also become more willing to look at riskier areas of the market to find growth in the past couple of months," says Rupert Mitchell, head of equity capital markets at Jefferies International. "However, many businesses are going to be heavily dependent on small bolt-on acquisitions to drive inorganic growth next year." Coming at the end of two years dominated by recapitalizations, the shift towards equity raisings to fund mergers and acquisitions is welcomed by shareholders. German construction company Bilfinger Berger successfully completed a €270 million rights issue in October to fund the acquisition of Austrian industrial services company MCE, and UK construction group Balfour Beatty raised £353 million via a rights issue in November to fund its acquisition of US engineering consultancy Parsons Brinckerhoff.