Diva Synergy fund positions for renewed M&A activity in 2013
Managers at the Paris-based Diva Synergy Fund, which focuses on merger arbitrage strategy, expect M&A activity to extend its pick-up this year.
Amit Shabi (pictured), cofounder of Bernheim, Dreyfus & Co. and co-manager of the Diva Synergy Fund said the fund has completed another year in positive territory, outperforming its benchmarks.
The fund returned +3.55% (€ class) and +3.74% ($ class) net to investors in 2012, bringing returns since inception to +27.04% and +35.74% respectively. Over the past three years, compounded annual returns are +8.90% (€ class) and +8.46% ($ class).
Diva Synergy has ranked first in BarclayHedge’s Top 10 Merger Arbitrage funds for the past three years (last in date for the period ending September 30, 2012).
Shabi said global mergers and acquisitions rose to the highest level in four years on Q4 2012 as companies worldwide announced $692 billion in purchases. “We believe that the pickup in takeovers will extend into next year as American and European lawmakers take more decisive steps to fortify the global economic recovery.”
He expects the cloud-computing and network-security sectors to remain active and companies attractive for potential acquirers. “This trend, started last year with SAP and Oracle as two of the busiest consolidators, should remain strong in 2013 as new and disruptive technologies are emerging and buyers will undoubtedly want to acquire them,” he added. “We are especially looking at activities surrounding cloud analytics, monitoring and security, and finding companies to gain exposure to these trends.
The pharmaceutical industry is also expected to be very active, with biotech companies as likely targets. Patent cliffs remain a concern for large pharmaceutical groups but Shabi considers that a powerful driver for 2013 is likely to be the hunt for attractive technologies in the gene-sequencing space, which is still at the early stages of its evolution.
The energy sector is also set for strong M&A activity. Large groups and nations should continue to seek to secure access to valuable natural resources, while energy transportation/distribution is also becoming a major source of interest, with energy services companies becoming particularly attractive.
“In a difficult year for merger arbitrage and quiet M&A activity, we are happy with the Fund’s positive returns and very confident for the year to come,” Shabi said. “Deal pipelines are reloading, which leads us to believe that 2013 will mark a strong acceleration in European M&A activity which will translate into a multiplication of attractive investment opportunities in the event driven space.”