Solactive M&A Europe TR Index

Systematically investing in European takeover candidates

 

Open End PERLES on Solactive M&A Europe Total Return Index

I. Mergers and acquisitions: Various motives

Mergers and acquisitions (M&A) are a basic element of the strategy for many companies. They pursue various motives in that context: An M&A deal is just as likely to be based on a desire for external growth as the establishment of a strategic alliance or the wish to "freeze out” a competitor. From a global perspective, there have always been periods when there have been a particularly large number of mergers and acquisitions of significant size. Such boom phases were frequently linked with a friendly market and economic environment. For example in the year 2000, global M&A volume reached a record high of USD 941 billion, according to figures from Dealogic.

II. M&A strategy: Investors lying in wait

When the euphoria surrounding the New Economy evaporated and there was a correction on the equity markets, M&A deals also crashed. But the appetite for takeovers has long since reawakened and global volumes have been maintained at a high level for years. There is also great interest in this market among investors. As soon as a company comes into the sights of a buyer or possible merger partner, the share price usually rises strongly. A prime example comes from Switzerland: At the end of January 2017, US consumer goods giant Johnson & Johnson made a takeover bid for Actelion. The purchase price of CHF 280 per share in the biotech company was 23 percent above the last stock market price before the offer. Against this background, it is no surprise that many investors are constantly on the lookout for potential targets. In this way, they hope to pick up some lucrative M&A premia. However, it is far from easy to distinguish between the frequent takeover rumors and substantial news. Additionally, this approach requires a lot of patience.

III. Index methodology: Multi-stage selection process

The Solactive M&A Europe Total Return (TR) Index approaches this exciting investment theme using a systematic, rule-based method. The experienced service provider Solactive AG launched the benchmark in April 2016, defining a clear objective: Investors are to be given the opportunity to allocate their capital to a basket of 40 European stocks which are interesting candidates for takeover because of their relative undervaluation. To be considered for selection, a company has to meet several criteria. Firstly, the method stipulates an average daily share trading volume of at least five million euros over the last six months. At the same time, the market capitalization has to be within a range of 50 million to 20 billion euros.

IV. Quality features: Focus on valuation

All the securities that make it through this preliminary selection process are checked against known stock market indicators. For example, the average of the analysts’ forecasts for the profits per share with regard to the next fiscal year (FY1 IBES EPS) must be positive. The same applies to the price to book value (P/BV) and the one-year sales growth. Any securities that are overvalued in relation to their sector in terms of the P/BV are left out of the reckoning. The same applies to companies for which the average EPS estimate is below the sector median. Of the remainder, the 40 companies with the strongest sales growth go into the index, equally weighted. To ensure that the measure takes the dynamics of the M&A business into account, Solactive performs a quarterly check and makes any necessary adjust-ments – restoring the balance in the process.

V. The product solution

A single transaction is all it takes to participate cost-effectively in a targeted M&A strategy, diversified across Europe and regularly adjusted, with the UBS Open End PERLES on the Solactive M&A Europe TR Index. The product mirrors the underlying asset one-to-one after deduction of the management fee of 0.75 percent, with no term restriction. Any net dividends of the index members are reinvested.

 

Historical index performance

 

Important note: The price data of the underlying asset that are displayed here merely serve as an indication and may not necessarily correspond to the prices that are relevant for the repayment or for any thresholds such as a stop-loss event or a knockout event. Only the sources and reference prices specified in the legally binding product documentation are relevant.

 

Current index composition

 

As of 03.06.2020

Name Weightings
IPSEN SA 3.11%
FLUTTER ENTERTAINMENT PLC 3.11%
EURONAV NV 2.89%
ASM INTERNATIONAL NV 2.72%
BIOMERIEUX 2.63%
CIE GENERALE DES ETABLISSEMENTS MICHELIN 2.62%
UNITED INTERNET AG 2.57%
SULZER AG 2.56%
TIETOEVRY OYJ 2.53%
ASR NEDERLAND NV 2.48%
RUBIS SCA 2.48%
ORPEA 2.42%
DASSAULT AVIATION SA 2.40%
VIFOR PHARMA AG 2.40%
PUBLICIS GROUPE SA 2.35%
LOOMIS AB 2.31%
HIKMA PHARMACEUTICALS PLC 2.30%
ALTEN LTD 2.30%
1&1 DRILLISCH 2.15%
BELLWAY PLC 2.14%
DCC PLC 2.13%
DEUTSCHE WOHNEN SE 2.02%
LANXESS AG 1.93%
PARGESA HOLDING SA 1.91%
BUCHER INDUSTRIES AG 1.74%
YARA INTERNATIONAL ASA 1.74%
GROUPE BRUXELLES LAMBERT SA 1.68%
BAVARIAN NORDIC A/S 1.60%
DANSKE BANK A/S 1.51%
ACCOR SA 1.49%
AGEAS SA NV 1.48%
FRAPORT AG 1.48%
DNO ASA 1.45%
EURAZEO SE 1.39%
SCOR SE 1.37%
ERSTE GROUP BANK AG 1.35%
AMS AG 1.27%
MICRO FOCUS INTERNATIONAL PLC 1.12%
CARNIVAL PLC 0.88%
INTRUM AB 0.83%
ATOS SE 0.83%
FLSMIDTH & CO AS 0.83%
ELIA GROUP SA/NV 0.83%
TALANX AG 0.83%
AAREAL BANK AG 0.83%
THALES SA 0.83%
AUTOSTRADA TORINO-MILANO SPA 0.83%
SOPRA STERIA GROUP 0.83%
SWISS LIFE HOLDING AG 0.83%
HELVETIA HOLDING LTD 0.83%
REDROW PLC 0.83%
ILIAD SA 0.83%
BAWAG GROUP AG 0.83%
BUZZI UNICEM SPA 0.83%
CORESTATE CAPITAL HOLDING S. 0.83%
MERCK KGAA 0.83%
AF POYRY AB 0.83%
DART GROUP PLC 0.83%
CEZ AS 0.83%
CARGOTEC OYJ CLASS B 0.83%
DIALOG SEMICONDUCTOR PLC 0.83%
KION GROUP AG 0.83%
SODEXO SA 0.83%

 

 

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