Europe’s Executives Rule Out M&A as Political Storms Rage
(Bloomberg) -- European executives are becoming less likely to buy and sell businesses as political turmoil and regulatory uncertainty sap their confidence, according to a report by law firm CMS.
In a survey of top officials at companies and private equity firms in Europe, 45% of respondents aren’t considering mergers and acquisitions at all in the next year, CMS and financial news service Mergermarket wrote in a report released Thursday. That’s up from 28% last year. Nearly three quarters said they expect European M&A activity to decrease or remain unchanged over the next 12 months.
Companies and private equity firms are “taking a ‘wait and see’ approach to political machinations before committing to deals again,” CMS wrote. “Dealmakers are setting the bar high and only moving for the highest quality assets.”
Survival in an unpredictable political environment has trumped the allure of new businesses for many companies, according to the report. Deals involving European companies have already fallen 26% this year to $698.5 billion, data compiled by Bloomberg show. The decline comes amid the possibility of a hard Brexit in the U.K., political upheaval in Italy and trade wars between major economies.
Those firms considering deals have adopted a more defensive mindset, with many focusing on selling businesses or making smaller bolt-on acquisitions rather than big, blockbuster deals that will transform their companies, according to the report. About 95% of respondents expect distressed M&A to rise over the next year, while 72% of those surveyed think it will become more difficult to raise money. The survey targeted senior executives that have been involved in a transaction in the past two years.
“Rising protectionism and escalating tariff spats between the major economies of Europe, the U.S. and China have taken cross-border deals off the table for many,” CMS said. “A growing number of broken deals have also made senior management hyper alert for fear of repeating the failed transactions of colleagues and rivals.”
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