European M&A investors target US - GlobalData
Brexit and other macroeconomic uncertainties are leading to a rise in European acquisitions of US targets according to information from GlobalData, the data and analytics provider provider.
It says there were more than 430 deals of such a nature, worth $100bn conducted between 1 January to 25 November 2019. However, the dealmaking has accelerated, with some 25 in October to 41 in the 1-25 November period.
Aurojyoti Bose, lead analyst at GlobalData, said: "This can be attributed to the growing attractiveness of the US compared to its European counterparts. Uncertainty over Brexit and its impact on Europe and trade policies is denting corporate confidence towards dealmaking in the region with companies looking for growth avenues abroad. Moreover, easy access to capital through alternative lenders in Europe also spurs the appetite for acquisitions."
Bose also cites regulatory actions, which scuppered the proposed deal between supermarkets Sainsbury and Asda in the UK and Siemens and Alstom on the Continent, as additional factors driving M&A away from the European region.
"The US is a market with large scale that offers economic prospects and pro-business environment for European companies," Bose adds.
"The drop in the US corporate tax rate in late 2017 made US businesses more attractive for European investors/acquirers. The wave of M&A activity can also be attributed to the optimism over US-China trade talks with both countries moving towards striking a deal."
"With Brexit uncertainty, the US is likely to remain an attractive investment destination for European acquirers. However, heightened government scrutiny of deals, political intervention and protectionism, and the regulatory environment in the US are likely to remain challenging for cross-border M&As."
Key activity outlined by GlobalData includes:
- The average deal size in Q4 2019 stood at $506.7m, which was significantly higher compared to all previous quarters, an indication of announcement of big-ticket deals during the current quarter.
- While the number of billion-dollar deals stood at five in Q2 2019 and four in Q3 2019, Q4 2019 (through November 25, 2019) has already witnessed six deals with close to a month to go in 2019.
- Some of the notable high-value European outbound acquisition deals involving American targets announced during the current quarter include: the acquisition of Tiffany by LVMH Moet Hennessy Louis Vuitton for more than $16bn; the acquisition of The Medicines Company by Novartis AG for $9.7bn; the takeover of StubHub by Viagogo for $4.1bn; and the acquisition of Ra Pharma by UCB for $2.1bn.
- The UK accounted for about 50% of the outbound acquisition volume (involving American targets) while France led in terms of total value with 45% share in Q4 2019 on the back of the LVMH-Tiffany deal.
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