All Signs Positive for European M&A Market

Europe, the Middle East and Africa (EMEA) is showing a significant increase in deal flow — with deal count up more than 100 percent YoY.

Cross-border mergers and acquisitions (M&A) activity in the region year-to-date has been increasing drastically with transatlantic mergers being the major driver. This increase bodes well for the next half of the year, and the hope is that the region can maintain pace.

Some companies are in the process of refocusing their core businesses. In addition to traditional M&A, they’re engaging in financing, capital raises, non-performing loan (NPL) exits and multiple IPOs. After reaching record levels of activity in Q1 2021, the activity of special purchase acquisition companies (SPACs) has slowed down. According to data on our platform published in the newly released Q3 2021 SS&C Intralinks Deal Flow Predictor, we do not expect to see a big wave of bankruptcy and restructuring deals.

Market drivers and opportunities

Continued low interest rates and excess amounts of dry powder are driving activity worldwide. Companies and funds are taking advantage of cheap money to buy assets. Private sector companies, having survived last decade’s economic crisis as well as the COVID-19 pandemic, are looking to grow both organically and through acquisitions. Several companies, post-pandemic, do not have the financial resources to support a strong comeback and are seeking investors to support their plans. In 2021, cash is often the preferred option.

Pre-due diligence, sellers have been requesting higher valuation multiples. But these aren’t always translating to successfully signed deals. Buyers are just not seeing the value with a lot of opportunities out there and a shortage of good assets. For quality assets, competition is fierce, triggering a boost in preemptive offers.

Sectors that are currently most active are Power & Energy (especially Renewable Energies) as well as a lot of divestments in Oil and Gas deals. We’re expecting consolidation in this sector. The largest sector, however, is Industrial. We also see major opportunities in Infrastructure, Healthcare and Real Estate and Travel, post-pandemic. One major trend: Investors are looking at ESG-positive companies.

The mood among dealmakers in EMEA is positive. Legal and financial advisors will continue to be extremely busy. The level of available capital, the need to restructure portfolios to capitalize on new economic developments, plus the accelerating pace of vaccination across EMEA lay the ground for business development and a bull M&A market in H2. 

Find out more in the Q3 2021SS&C Intralinks Deal Flow Predictor. Along with our forecast of M&A activity for the next six months, the latest issue of the SS&C Intralinks Deal Flow Predictor includes a spotlight feature on SPACs — “The SPACs Wave: What’s in Their Future?” and an interview with Jeff White, partner at Skyview Capital, on the competition against SPACs for assets by private equity (PE) in today’s market.