European outbound M&A activity sees corporates turn elsewhere to find growth

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Confidence among corporates to invest heavily across the continent has been replaced/spurred by political and economic uncertainty according to a new report by Mergermarket, the provider of M&A data and intelligence.

Just USD 391bn was spent on European assets across 3,223 deals, down 38.8% compared to last year’s USD 638.9bn during the same period.

European corporates have instead turned elsewhere in search of growth, with 2Q outbound activity reaching USD 74.1bn, its highest quarterly value since USD 78.4bn was spent in 4Q17.  The majority of European outbound M&A targeted the US, which accounted for 70.4% of deal value this last three months. Germany’s Infineon Technologies’ USD 9.3bn acquisition of Cypress Semiconductor and a USD 5.7bn tie-up between France-based Dassault Systemes and Medidata Solutions significantly helped push the figures.

A lack of progress on situations involving FIAT Chrysler and Renault, alongside the failure to complete deals between China Three Gorges/EDP and Sainsbury’s/Asda are indicative of the lacklustre activity and subdued sentiment felt throughout H1. Subsequently, European M&A was responsible for 21.7% of global activity – around 10 percentage points lower than 1H18.

The European Commission’s decision to block a tie-up between Siemens/Alstom earlier this year, may further reduce the likelihood of other such large-scale intra-European M&A being explored. Deals between European firms – USD 212.9bn – dropped by 40.4% compared to 1H18.

Jonathan Klonowski, Research Editor (EMEA) at Mergermarket commented: “Contending with a challenging political environment appears to be the ‘new norm’ for European dealmakers, with government intervention and protectionism increasingly influencing activity.”

Other key data points include:

  • Two of the five deals targeting Europe above USD 5bn announced in the second quarter were conducted by private equity
  • Take-privates remain active following a buoyant end to 2018. This year, 18 public-to-private buyouts worth a combined USD 21bn took place – the highest YTD value and volume since the crisis
  • Had it not been for Abbvie’s USD 63bn Allergan takeover, quarterly inbound M&A would have failed to reach USD 50bn for the first time since 4Q13.