Investor sentiment in Europe is plagued by growing political uncertainty and disappointing growth figures coming out of some of its biggest economies. Mergers and acquisition (M&A) deal value in Europe fell to $122.9bn, the lowest tally for any quarter since the third quarter of 2012.
The biggest deal announced on the continent was ZF Friedrichshafen’s $7.2bn acquisition of Swiss brake technology manufacturer Wabco. The proposed merger between Siemens and French rail transport company Alstom was blocked by the European Commission over anti-trust concerns, further denting confidence. Inbound M&A from foreign buyers has dropped as well and is likely to be hampered further by the EU’s announcement of a new foreign direct investment screening framework.
A rare area of heightened activity in Europe is the private equity space. With record levels of dry powder at their disposal and in need of fresh acquisitions to replace the flood of exits over the past few years, private equity firms have been on the hunt for deals. Buy-outs totalled $35.9bn over the past quarter, equal to 29.2% of total deal activity, the highest on Mergermarket's record for a first quarter. Take-privates continue to be popular investments for private equity funds. Despite the wobbly start to the year, the potential tie-up between Commerzbank and Deutsche Bank could provide a much-needed boost to a largely lethargic market in Europe.
The story across the Atlantic is quite different, as the US accounted for more than half of the global M&A deal value across the globe in the first quarter of 2019. Though the deal count was down to the lowest levels in half a decade, deal value was nearly level with the record high $415.6bn of the first quarter 2018. The bulk of the activity was domestic, with a lower number of cross-border blockbusters, which had defined 2016 to 2018.
Only nine mega-mergers have been announced worldwide in 2019 as of mid-April, against 14 over the same period in the previous year; all but two of these were between two US-based corporations. Bristol-Myers Squibb’s $89.5bn bid for Celgene is the largest deal announced so far in 2019 and could revive big pharma deals, while the BB&T offer for SunTrust has revived hope for further consolidation among regional banks in the US.
The payments and financial software sector also gave rise to two huge deals: Fiserv’s $38.4bn acquisition of First Data and Fidelity National Information Services’ $42.6bn bid for Worldpay.
Alongside the deals between competitors and strategic acquirers, the US private equity sector has hardly stood still. Compared with 2018’s record start of the year, US private equity activity slowed a little, but is still high in a five-year context. The Federal Reserve’s decision to suspend its previously aggressive interest rate hiking programme for the time being has eased the pressure on US deal making. So long as monetary policy remains supportive, M&A's upward momentum will continue.
