Over the past decade, Europe has been the dominant region for infrastructure deal activity. The attractiveness of the region is even more evident when considering assets acquired by institutional investors.
Although deal activity has steadily declined from the levels reached prior to the global financial crisis, there are signs that a recovery is underway, according to infrastructure firm First State Investments.
Deal activity for the first half of 2011, for example, has almost matched the level of deal volume for 2010 as a whole. This recovery is occurring in the context of a weak macroeconomic environment, suggesting that investors are able to identify and secure financing for quality infrastructure assets, which tend to be economically resilient.
Four key themes have emerged in the current environment. While some of these are driven by financing pressures, which have been exacerbated by the recent economic and financial turmoil, there are also regulatory and strategic forces at play. Each of these is examined separately with a short description, the ‘science’ or theory underpinning the theme, followed by recent transactional evidence from the European context.
First State provides specialist asset management services to wholesale and institutional investors across a diverse range of asset classes, including Asia Pacific and global emerging market equities, global equities, property securities, infrastructure and global natural resources. First State has more than 190 staff in the UK in London and Edinburgh and provides a range of specialist investment products to investors. First State is part of Colonial First State Global Asset Management, the consolidated asset management business of the Commonwealth Bank of Australia.