US and Europe M&A hits 10-year high

July 2017 | DEALFRONT | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

July 2017 Issue

Mergers & acquisitions (M&A) activity between the US and Europe is at a 10-year high according to recently published M&A data – an analysis which highlights target sectors, the ranking of financial advisers and the largest year-to-date deals of 2017.

The data, compiled by Thomson Reuters in May 2017, reveals that, despite continuing geopolitical uncertainty, YTD announced cross-border M&A activity between the US and Europe totalled $171bn – 82 percent more than the $94.2bn recorded at the same time last year and the highest YTD total since 2007.

One of the deals that account for much of the 10-year high is the agreement between Switzerland’s speciality chemicals company Clariant and US chemicals group Huntsman Corporation – a materials sector deal with an enterprise vale of £20bn which Peter R. Huntsman, president and CEO of Huntsman, said will “create a global leader in specialty chemicals with a combined balance sheet providing substantial financial strength and flexibility”. The deal is the latest in a series of chemical manufacturing tie-ups – among them the disputed $28.5bn transaction involving Dutch paints and coatings group Akzo Nobel and its US rival PPG Industries.

Other announced US and European cross-border M&A transactions highlighted by Thomson Reuters include the $29bn Johnson & Johnson (US) acquisition of Actelion Pharmaceuticals Ltd (Switzerland) in the healthcare space, as well as the $17.8bn consumer staples sector deal which saw Mead Johnson Nutrition (US) acquired by Reckitt Benckiser Group plc (UK). To a large extent, optimism over US president Trump’s economic agenda has buoyed stock markets worldwide, as well as the US dollar, which has made foreign acquisitions cheaper for US companies. In addition, low interest rates are also keeping down borrowing costs.

Overall, the data appears to indicate that Dutch and Swiss companies are favoured by US buyers, with $70.2bn worth of deals announced so far this year. Indeed, credit ratings agency Moody’s announced a $3.3bn deal to buy Netherlands-based business intelligence firm Bureau van Dijk from a Swedish private equity firm.

In addition, the UK is confirmed as Europe’s biggest acquirer in the US, with deals totalling $21.1bn so far in 2017, followed by Switzerland with $11.5bn.

The healthcare, materials and consumer staples sectors respectively accounted for 29 percent, 25 percent and 12 percent of YTD 2017 US and European cross-border M&A deals. The retail sector also featured, with the $7.5bn sale of Panera Bread Company (US) to JAB BV, an investment vehicle of JAB Consumer Fund and JAB Holding Company (Luxembourg), ranking highly on Thomson Reuters’ list of YTD largest deals.

Between European Union (EU) nations, the value of announced deals totalled $206.9bn (£159.5bn) so far in 2017, more than double the $95.5bn recorded at the same time last year. Among the major deals seen in Europe were the €16bn (£13.8bn) bid by Italy’s Atlantia for toll road giant Abertis, and a £2bn hostile approach for UK laundry firm Berendsen by French rival Elis. Furthermore, France has been the most active EU nation, accounting for 26 percent of deals by target country and 42 percent by buyer. Thomson Reuters also found that the UK has been the third most targeted nation, with 572 deals worth $18.5bn, and the second most acquisitive, with 627 deals worth $19.5bn.

As far as financial advisers are concerned, Bank of America Merrill Lynch leads the financial adviser ranking for announced M&A between the US and Europe so far this year with $83.1bn or 48 percent of the market, followed by Goldman Sachs Group, Inc. and Lazard.

With promising drivers in place, the outlook for the global M&A market in 2017 and beyond is positive, with deal volumes consistent with recent totals.

Fraser Tennant