US tourists coming to Europe to go shopping over the summer is a tradition as established as European tourists flocking to New York for bargain-hunting weekends. This year, however, some US visitors have been looking for bargains in Europe that they aren’t planning to ship home.
According to Standard & Poor’s, 620 M&A deals have been announced in the past 12 months that involve a US acquirer and European target. Total cash and short-term holdings among non-financial S&P 500 firms have risen by 42.6% over the past two years, which translates to a war chest of well over $1 trillion.
It is not surprising that many of them have therefore been looking internationally to put this money to work. Deals have ranged from Kraft’s buyout of Cadbury to Global Infrastructure Partners’ acquisition of Gatwick Airport to State Street’s purchase of Intesa Sanpaolo’s securities servicing unit.
But a closer look at the figures reveals that the recent volatility within the eurozone might be giving some buyers cold feet.
S&P revealed that of the $87 billion of deals announced over the past 12 months, just $21.3 billion has been in 2010. This was, however, before Newscorp’s announcement that it intended to buy the remaining stake in British Sky Broadcasting – a deal that if it goes through will be worth $14.5 billion.
And with economic growth in the region likely to remain sluggish at best and persistent constraints on credit, the number of firms that might be vulnerable to takeover can only increase. By June the euro had fallen 16% against the US dollar – which makes the logic all the more compelling. It is not only large corporate takeovers that are on the cards – private equity buyers accounted for 14% of European acquisitions by US buyers last year and will likely bid aggressively for European targets over the next one.
The most popular sectors have so far been information technology, consumer discretionary, industrials and healthcare. Corporates reckoned likely to attract US suitors include Astrazeneca in the UK, tourism operator TUI of Germany and Danish shipping company Dampskibsselskabet. But with such a substantial amount of money burning a hole in their pockets, US buyers are likely to be running their eyes over the books of many more. And it will probably take more than the sovereign wobbles of peripheral economies to put them off.
