Europe has become the main target for cross-border M&A in Q1 2017, as US companies ride a Trump-fuelled equity rally to hunt for bargains across the Atlantic.
US activity for cheaper rivals send European M&A soaring
Mergers and acquisitions in Europe hit $215.3bn in the quarter, up 16% compared to the same period a year ago. That marks the strongest start to the year for deals in the region since 2008, according to Thomson Reuters data – and an article in the FT.
The sharp rise in transactions involving European targets came on the back of an all-time record of overseas acquisitions by US companies, which spent $114bn abroad in the quarter.
“There have been more cross-border deals into Europe because there is more optimism in the region after it enjoyed a little more growth and greater political stability,” said Blair Effron, a co-founder of Centerview Partners.
But foreign bids for US companies fell to their lowest level since the start of 2014 in the first quarter of 2017, with dealmakers blaming Mr Trump’s protectionist rhetoric for deterring international takeovers while Chinese companies have been hamstrung by domestic capital controls.
Due Diligence Sign up to your daily M&A email briefing Keep up to date on the latest news and insight on deals every weekday morning Foreign acquisitions of US companies fell almost a quarter to $86.9bn, while deals among US groups were up only 3%, suggesting uncertainty among buyers following Mr Trump’s election.
“While the first quarter saw a fair amount of outbound cross-border M&A from US companies supported by strong valuations, favourable exchange rates and easy access to inexpensive financing, the predominant attitude so far has been “wait and see” on what happens with tax reform and protectionism,” said Scott Barshay, a senior dealmaker at law firm Paul Weiss.
Overall global M&A activity in the first quarter rose 7% to $726.5bn compared to a year ago, according to Thomson Reuters.
“The atmosphere from a business standpoint is actually pretty positive right now. It seems to set itself up well for M&A, but executives need to have more certainty on outlook. Without that, there is no urge to merge,” said Leon Kalvaria, chairman of Citigroup’s institutional clients group. M
&A advisers said that continued weakness of UK and European currencies also encouraged deals led by US and Asian groups, with a series of major transactions involving European groups announced in the quarter.
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