2 | The Deloitte M&A Index H1 2015 Factors influencing M&A in H1 2015 Europe emerging as the preferred target Figure 2. Total deal values for domestic and inbound European M&A 1 15 YTD) region for inbound acquisitions (2000- So far this year six of the top ten deals in Disclosed deal values ($bn) Europe were from non-European acquirers. 1,500 Last year $797 billion worth of deals were announced in Europe of which $212 billion, 1,200 or 27 per cent, were deals with non-European 900 acquirers, the highest percentage of inbound deals into Europe in well over a decade. 600 This means that nearly one in four dollars 300 spent on European M&A came from either 0 the US or Asia. 0 1 D 200 200 2002 200320042005 200620072008 200920102011 2012201320142015 YT The European Commission has recently Domestic deal values ($bn) Inbound deal values ($bn) upgraded its growth forecasts for Europe citing weak oil prices and the declining euro Source: Deloitte analysis based on data from Thomson One Banker as the factors that should boost recovery prospects. We anticipate that the positive growth outlook combined with favourably priced assets are likely to continue attracting dealmakers into Europe in 2015. Oil: Race to the bottom could give a boost Figure 3. Price of Brent vs. M&A deal volumes by oil and to M&A gas, petrochemicals and pipeline companies as acquirers The sharp decline in oil prices has eroded (2000-14) the profit margins of oil companies and put $/bbl Deal volumes pressure on capital expenditures, refinancing 120 1400 and the ability to raise additional debt. 100 1200 80 1000 The decline has increased the risk of asset 60 800 impairment and has had an adverse impact 40 600 400 on the valuation of many companies. 20 200 0 0 The shape and time frame of the oil price 200020012002200320042005200620072008200920102011201220132014 recovery is widely debated. The challenge Brent ($/bbl) Deal volumes for the industry is to adjust to new market conditions to improve returns on capital. Source: Deloitte analysis based on data from Thomson One Banker and Bloomberg This means that both conventional oil companies and shale producers are now under pressure to drive down costs and improve operational efficiencies. M&A is one way to achieve this. 1. 2015 YTD as at 18 March 2015