Europe an M&A Leader into 2015?

So far 2014 is a year of mergers and acquisitions rebound. And Europe is exceptional, with Germany acting as a dealmaking mainstay for the region.


4 December 2014

Intralinks Deal Flow Predictor - Europe M&A

So far 2014 is a year of M&A rebound. And Europe M&A is exceptional, with Germany acting as a dealmaking mainstay for the region. Also, the economies of France, Spain, and Italy are beginning their recession thaw and will be publicly heating up in Q1 2015.

Overall, the Europe, Middle East and Africa (EMEA) region’s early-stage M&A activity is up 16.2 percent over the last four quarters, says the Intralinks Deal Flow Predictor (DFP). The Intralinks DFP tracks global M&A sell-side mandates and deals reaching the due diligence phase before public announcement.

This Euro-surge is occurring despite sluggish economic expansion. But the rise indicates how EMEA offers a pool of top-shelf targets and has plenty of recovery potential left in it. By comparison, with an 18.7 percent growth rate, North America has held only a narrow lead in the last four quarters.

EU Dealmaking Looks Strong

Some statistics might help: In Europe through Q3 2014 year to date, there was:

  • A 20 percent increase in European early-stage M&A, compared with the prior year — the highest growth rate of any region
  • A 43 percent jump in early-stage M&A in France, Italy and Spain
  • A 24 percent increase in announced European high-tech sector deals

Besides high tech, other strong sectors through Q3 YTD were health care, and media and entertainment.

The European M&A Performers

There are multiple reasons driving this resurgence. The biggest factor is Germany — which is expected to keep driving M&A activity into early 2015. Foreign investors are interested in its exports businesses, particularly those of the Mittlestand. This is the tier of small manufacturing companies credited as driving much of Germany’s economic growth. In general, they are independent or privately owned. As the family owners of these companies retire, the firms make attractive acquisitions.

Additionally, as mentioned, France, Spain and Italy are seeing economic recovery — the Intralinks DFP claims this will result in a “significant increase in deal announcements” through Q1 2015. The Europeans are going cross-border, too: Industrial powerhouse Siemens AG bought out U.S.-based Dresser-Rand, a provider of energy solutions, for $7.6 billion. And France’s massive ad company Publicis Groupe made a $3.7 billion cash offer for U.S.-based Sapient, a media and marketing firm.

Clouds to Rain on M&A Parade?

Are there potential threats? Plenty. To name a few: The tension over the Ukraine’s future, fear of Ebola spreading, and Japan’s slipping into recession could dampen M&A activity in Europe and beyond. Additionally, many dealmakers believe the tech sector is showing signs of a bubble, says an Intralinks dealmakers sentiment survey.

Certainly growth and demand overall could be better. But barring catastrophe, the fundamental M&A driver — the need for buyers and sellers to deliver shareholder value — isn’t going anywhere. Deals will be made in Europe and elsewhere.