European M & A's at near-record pace
According to an article in today's Wall Street Journal ("Cross-Border Deals Feed an M&A Boom In Europe", 6/27/05), the volume of European deal making is brisker this year than any since the bubble years of 1999-2000. A trillion dollars worth of mergers and acquisitions is possible. This reflects a major spike in cross-border deals, something Europe has only slowly managed to adjust to, despite the common market and, for many countries, common currency.
As the article puts it:
Bold, cross-border takeovers in the financial-services, telecommunications and real-estate sectors are driving much of the deal activity.
The article makes four major points of interest.
First, that the M & A fever has a "'domino effect', whereby a deal in one sector spawns other, often larger, ones, especially in the financial-services and telecommunications sectors." That's been borne out in the banking industry especially. It's what we consider the anxiety to make a deal, any deal, or be left behind.
Second, there is "the growing determination of companies to do cross-border deals, often because growth opportunities in their home markets have become limited. That determination still runs up against the patchwork of protectionist policies still in place across many European Union countries."
Third, private-equity companies are behind a significant percentage (23%) of the deals. These firms are often pooling resources in order to buy out larger firms. These sales are usually to reorganize the company for later sale, so they can "monetize earlier investments."
Fourth, the buyout game is likely to accelerate, funded by the accumulation of oil in the hands of Middle Eastern oilmen, what with the rise in prices. This is seen as an effort to diversify assets. It certainly will complicate Europe's already touchy relations with Arab nations and with Europe's Muslim population.
