BY Fraser Tennant
Dealmaking sentiment for the year ahead across the European M&A market is positive despite the ongoing impact of last year’s Brexit vote, according to a new report by CMS in association with Mergermarket.
The report, ‘Changing tides: European M&A Outlook 2017’, which canvassed the opinions of 230 Europe-based executives from corporates and private equity firms, found that 67 percent expect European M&A activity levels to increase over the next 12 months while 5 percent anticipate a slowdown.
In comparison, last year’s survey, which was conducted shortly after the Brexit vote, was met with a subdued response from dealmakers as to upcoming European M&A, with 66 percent expecting activity to decrease over the forthcoming year and 24 percent anticipating an increase.
That said, M&A in Europe has been showing signs of stabilisation this year, with Mergermarket data revealing that M&A deals in H1 2017 sharply increased in value compared to the same period in 2016, rising 33 percent to €443bn.
“The mood among deal makers is markedly different in 2017,” confirms Stefan Brunnschweiler, head of the corporate/M&A practice group at CMS. “While acknowledging some of the challenges they face, respondents are largely optimistic about deal making prospects for the coming year, with many suggesting they are ready to take advantage of opportunities stemming from dislocations that result from Brexit and from a return to economic growth in the eurozone.”
In addition, survey respondents indicated that European financing conditions are currently favourable and that this will drive large, transformational deals over the next 12 months. Indeed, 88 percent expect similar or more favourable ﬁnancing conditions over the coming year. Furthermore, 66 percent of survey respondents expect to engage in M&A, including acquisitions, divestments or both.
The report also notes that overseas buyers have been setting their sights on the European market, with four of the top 10 European deals in H1 2017 led by bidders located outside the EU – a trend that 90 percent of executives believe will continue.
“European M&A in the first half of 2017 shows positive signs of recovery, with momentum gathering as we move through the year," said Kathleen Van Aerden, head of research EMEA at Mergermarket. “The €246bn total value recorded in Q2 2017 was up 25 percent on the previous quarter and was higher than any quarter in 2016.”
A market newly refreshed with confidence, dealmakers are currently adapting to a new normal in European M&A activity.