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US drives M&A action in Q1; EMEA episodic
US deal-making accounted for 61% of global transactions, and even the biggest deals involving EMEA targets had US buyers
Keith Mullin 3 Apr 2024
Keith Mullin
Keith Mullin

“On the verge of an M&A pickup? … Not from my standpoint.” That’s what I wrote in early January after seeing 2023 data showing mergers and acquisitions activity had hit a 10-year low.

That comment was mainly a reaction to the poor underlying deal-making backdrop but was also a pushback against the emotions-driven crossed-fingers, longings, yearnings, hopes and wishes being expressed at the time by everyone in the global M&A food chain about better prospects for deal-making. That’s an ecosystem with a lot of expensive mouths to feed.

Some chunky deals announced in the fourth quarter of 2023 had pumped up expectations for this year but market-watchers were choosing to ignore the fact that the soft/hard landing debate was still undecided, that global growth forecasts were weak; the monetary easing picture was less than certain, and geopolitics were atrocious. I found it tough to square all of the negatives against the expressions of rising confidence around deal-making.

My conclusion was that optimism was more about how bad 2023 had been and less about finding intrinsically compelling reasons in 2024 to drive deal-making. Especially once expectations around the much-vaunted fast slide in interest rates had started to be dashed owing to stubborn last-mile inflation and central bank politicking around timing.

Well, the first quarter is over and I’m standing by my January comments, although perhaps in a much more nuanced manner. M&A data from LSEG Deals Intelligence show that while worldwide M&A value was up 38% year-over-year to US$798 billion, it was down 10% quarter-on-quarter. And while 14 deals over US$10 billion in Q1 worth US$278 billion marked the best start for mega deals since 2019, the number of deals globally fell 31% year-over-year to a nine-year low. Asia-Pacific activity fell 28% to the slowest Q1 since 2013.

US at a 35-year proportional high!

What I was particularly struck by was the fact that US target M&A rose 78% to US$485 billion but even more so that that US deal-making accounted for 61% of the global transaction tally. That certainly overshadowed the 58% rise in European target M&A, rendering it something of a sideshow with total deal value of just US$142 billion. US deal value was bigger than its EMEA counterpart by a factor of almost 3.5x.

That for me was the key takeaway from a perusal of Q1 global M&A data: the scale of US dominance, crystallizing the fact that the US economy is at a different point to its European counterparts.

The US share of M&A deal value in the first quarter of 2024 hit a 35-year high!

Of the largest global deals announced in Q1, only one involved a non-US acquirer. That was Novo Nordisk’s US$16.5 billion acquisition of US biotech/pharma company Catalent. Otherwise, the big deals were all US-to-US. (As an aside, it’s worth pointing out that while Novo Nordisk is a Danish company, 60% of its sales are in the US. Its all-cash acquisition of Catalent will tip the balance of earnings even more in favour of the US.)

EMEA in a different scale vector

To look at deals with EMEA involvement, you had to factor in a significant downshift in value. Even here, the US theme was maintained as US buyers were also on the roster of the biggest announced deals involving EMEA targets:

  • International Paper Co’s US$9.8 billion all-equity counterbid for UK paper and packaging company DS Smith (to rival UK-based Mondi plc’s existing offer).
  • KKR’s US$4.95 billion take-private of German wind and solar park operator Encavis AG.
  • The US$3.75 billion purchase by Everi, the Las Vegas-based supplier of technology to the gaming industry, of the global gaming and PlayDigital businesses being spun off by UK-headquartered and New York Stock Exchange-listed International Game Technology.

The remainder of the largest EMEA-involvement deals were a bit of a hotchpotch. Most were domestic. The UK drove a lot of deal-making. Beyond the International Paper/Mondi/DS Smith and Everi/IGT situations, UK commercial property companies LondonMetric and LXi agreed to a US$3.7 billion all-share merger to create the country’s fourth largest real estate investment trust with a combined £6.2 billion (US$7.8 billion) portfolio (and 93% exposure to logistics, healthcare, convenience, entertainment and leisure).

Also in property, Barratt Homes, the UK’s largest homebuilder, is merging with Redrow Group, the seventh largest, in a deal worth a little over £3 billion (although the deal is subject to an enquiry by the Competition and Markets Authority). And UK retail lender Nationwide Building Society is acquiring listed bank Virgin Money to form the UK’s second largest mortgage lender in a deal worth £3.6 billion.

Europe ex-UK intermittent

Large-value Continental European deal-making had a more episodic feel to it. On the buyside, beyond Novo Nordisk’s US acquisition, Swisscom’s acquisition of Vodafone Italia (to be merged into Fastweb, Swisscom’s Italian subsidiary) was chunky at US$8.7 billion.

French companies were active. Saint-Gobain, the designer/manufacturer of materials and services for construction and industrial markets, is acquiring CSR Ltd, the Australian building products company, in a deal worth US$2.9 billion.

Pharmaceutical company Roquette Frères is engaged in a US$2.8 billion takeover of US-based IFF Pharma Solutions, while Sodexo, the global food services and facilities management company, spun off its employee benefits and engagement division (Pluxee) and listed it on Euronext Paris in a deal worth US$5.54 billion. Shares were distributed to Sodexo shareholders on a one-for-one basis.

Political/exotic deal of the quarter undoubtedly went to Yandex NV, the nominally Dutch parent of Nasdaq-listed Yandex, Russia’s Google equivalent. The Dutch parent offloaded its Russian businesses to a Russian investor consortium in a deal worth US$5.22 billion, marshalled by Russian government divestment rules at a mandatory 50% discount. Sale proceeds were paid in renminbi.

Q2 is underway. Next update at the half-year stage.

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