By Shayndi Raice
Deal makers in Europe say they are hopeful a spate of recent
activity signals mergers and acquisitions on the continent are
back.
Deal volume in Europe, the Middle East and Africa, known as
EMEA, is up 22% to $332.2 billion so far this year compared with
the same period in 2014, according to data tracker Dealogic. The
volumes have been boosted by megadeals, such as Royal Dutch Shell
PLC's planned tie-up with BG Group PLC, valued at nearly $70
billion. And now Finnish telecom-equipment maker Nokia Corp. is in
talks to buy French rival Alcatel-Lucent SA.
Economic growth in Europe has been modest, but some bankers
think that fresh stimulus from the European Central Bank, a weak
euro, low oil prices and easier access to borrowing may be enough
to spark more deal activity.
"The combination of signs of an economic recovery and
stabilization are reminding people that Europe is a big profit pool
and an interesting market," said Roland Phillips, a London-based
partner with boutique investment banking firm Centerview Partners
LLC. The firm recently represented Kraft Foods Group Inc. in its
megamerger with H.J. Heinz and Co. in the U.S. and British
cookie-maker United Biscuits Ltd. when it was bought by Turkey's
Yildiz Holdings.
Global M&A volume stood at $1 trillion so far this year, up
19% from the year-earlier period, according to Dealogic.
Some bankers attribute the spree to pent up demand. "Most of the
recent activity has involved intra-industry consolidation,
resulting in many cases from long-standing dialogue among industry
players," said François-Xavier de Mallmann, global co-head of
consumer, retail and health-care investment banking at Goldman
Sachs Group Inc. in London.
But Europe still has further to go to catch up with the U.S. At
the height of the last global M&A boom in 2007, deal volume in
the U.S. and EMEA was roughly on par. Today, European deal volume
accounts for 31% of global M&A, while the U.S. accounts for
more than 46%, Dealogic found.
European deal makers have been disappointed before. Last year
was a banner year for attempted deals that failed, including Pfizer
Inc.'s pursuit of U.K. pharmaceutical rival AstraZeneca PLC and
AbbVie Inc.'s tilt at Dublin-based rival Shire PLC. The value of
takeover deals rejected or withdrawn totaled more than $570 billion
last year, more than double the prior year's total and the
second-highest on record after 2008, according to Dealogic. More
than half of those aborted deals were in the EMEA region.
Some European bankers are hoping 2015 will be different. They
point to the strong dollar and weaker euro as an opportunity for
U.S. companies to take advantage of low prices. The recent purchase
by FedEx Corp. of Dutch package-delivery company TNT Express NV for
$4.8 billion is an example of a deal that was helped in part by
currency moves. FedEx said negotiations between the companies began
when the euro was falling toward 10-year lows against the dollar,
which helped increase FedEx's buying power.
"While it's not a driver of M&A activity, there's no
question it helps on the margin," said Adrian Mee, head of
international M&A at Bank of America Merrill Lynch, based in
London.
Write to Shayndi Raice at shayndi.raice@wsj.com
Access Investor Kit for Nokia Oyj
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=FI0009000681
Access Investor Kit for BG Group Plc
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=GB0008762899
Access Investor Kit for Royal Dutch Shell PLC
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=GB00B03MLX29
Access Investor Kit for Royal Dutch Shell PLC
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=GB00B03MM408
Access Investor Kit for BG Group Plc
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US0554342032
Access Investor Kit for FedEx Corp.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US31428X1063
Access Investor Kit for Nokia Oyj
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US6549022043
Access Investor Kit for Royal Dutch Shell PLC
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US7802591070
Access Investor Kit for Royal Dutch Shell PLC
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US7802592060
