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Top five family business mergers and acquisitions 2010

In sharp contrast to last year, it is no secret that the first quarter of 2010 has seen an increase in merger and acquisition activity, writes Katie Barker. 

Transactions are up 19% on the same period of last year, according to data from Thompson Reuters, and top analysts predict the trend is set to continue throughout 2010. Although we are not likely to see a return to 2007 levels for some years yet, the steady increase is being driven by rising confidence in deal market conditions, a good sign going forward.

CampdenFB.com has analysed the biggest deals of 2010 to assess how family businesses fit into this upturn in activity. The top five deals involving family businesses, according to data from Dealogic, are outlined below and show activity has increased across a variety of sectors. 

Family-run Simon Property Group made the third-largest acquisition of the year and only one of the deals sees a family business being acquired, suggesting families are on the front foot and looking to expand not just retrench in the post-recession world.

1. Simon Property Group's acquisition of General Growth Properties - $25 billion

Family-run Simon Property Group's offer to buy rival General Growth Properties is valued at $25 billion, making it the third largest transaction this year. The deal, yet to be completed, highlights the cash-rich status SPG is currently enjoying, as it has offered up to $9 billion in cash. General Growth Properties announced it was seeking Chapter 11 bankruptcy protection in November 2009, prompting the offer from SPG.

The company is under the stewardship of second-generation David Simon, who has added $18 billion in shareholder value since taking the helm in 1995. SPG has revenues in excess of $7 billion and currently owns or has an interest in 382 properties in North America, Europe and Asia. The company is headquartered in Indianapolis, Indiana and employs more than 5,000 people worldwide.

Related link: Simon Property CEO keeps focus on business amid family dispute

2. Heineken NV's acquisition of Femsa Cerveza SA de CV - $7.6 billion

In a bid to access the lucrative beer markets in Latin America, family-controlled Heineken acquired Mexico-based Femsa in January. The deal not only increases the company's profile in Latin America, but also consolidates its position as the world's second-largest brewer by revenue. The all-share transaction also sees Femsa gain a 20% shareholding in the Heineken Group and the right to appoint two non-executive directors to the supervisory board.

The Heineken family holding company, L'Arche Green NV, owns 58% of Heineken Holding NV. Commenting on the deal, non-family CEO Jean-Francois van Boxmeer said: "This is a compelling and significant development for Heineken. Through this deal we become a much stronger, more competitive player in Latin America, one of the world's most profitable and fastest growing beer markets."

3. Merck KGaA's acquisition of Millipore Corp - $6.9 billion

On the back of a year of growth in 2009, family-owned Merck KGaA announced in March it planned to buy US-based Millipore in a bid for expansion into the US. The deal, valued at $6.9 billion, is expected to create €2.1 billion in revenues for the pharmaceutical and chemical company, now in its 12th-generation of family ownership. Like SPG, Merck is using cash to finance a sizable portion of the deal, as well as agreeing to take on the net debt of Millipore.

With roots dating back to 1668, Merck is the oldest chemical and pharmaceutical company in the world. The founding family owns around 70% of the €7.7 billion business through its holding company E Merck KG and, through a family board, defines the basic strategy of the Merck companies.

Related link: Merck Group wins IMD-Lombard Odier Global Family Business Award

4. Teva Pharmaceutical Industries' acquisition of Ratiopharm - $4.9 billion

The sale of Ratiopharm, the generic drug company owned by Germany's Merckle family, to Israel-based Teva Pharmaceutical Industries in March was made necessary after the suicide of family patriarch Adolf Merckle in January 2009. Following a series of bad financial bets, Adolf's investment company, VEM, was left owing creditors €5 billion.

Ratiopharm was just one part of the Merckle family empire, which also includes Phoenix Pharmahandel, cement company HeidelbergCement and vehicle manufacturer Kassbohrer. Ludwig Merckle, Adolf's son and the family's representative, at the time said: "The separation of Ratiopharm is a painful step for us as the founding family. Taking this as given, I am confident that this is a good solution."

5. Essar Group's acquisition of Trinity Coal - $600 million

Essar Minerals, a subsidiary of the family-owned Essar Group, announced in March it planned to acquire US-based Trinity Coal for $600 million. The acquisition is part of the Indian conglomerate's plan to secure raw materials for its steel and power operations worldwide and will give it access to a further 200 million tonnes of coal in the US.

At only $600 million, this deal may seem small in comparison to the others. However, it is part of a larger expansion strategy by Essar Energy, which saw the company announce earlier this month it is planning a listing on the London Stock Exchange. The revenue generated from the listing will be used to fund future expansion, as vice chairman and second-generation family member Prashant Ruia explained: "Now is the right time to open the business up to global capital, to fuel our future growth ambitions and to address India's significant energy deficit."

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