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USA European Mergers and Acquisitions


A simple logic underpins the business of mergers and acquisitions: confidence in the corporate and political landscape increases deal-making.  Until now that is….

No one can deny that the last 6-9 months have been nothing short of interesting if not overwhelming.  Whether it was the barrage of global political shocks such as the US election, Brexit and many others  the deals just kept on coming.

Conventional wisdom which usually accompanies M & A activity was turned upside down.  Adding to the weirdness, real obstacles enacted by governments meant to complicate consolidation or foreign takeovers did not deter:  2016 ended as the second-best year for dealmakers since the financial crisis of 2008.

Europe’s leading multinationals looked to the US to escape slower regional growth and gain a foothold in an often more reliable and robust US market.

Examples included German conglomerate Bayer’s deal for US rival Monsanto and French yoghurt maker Danone’s takeover of WhiteWave Foods.

Last year, Bayer tried for a third time to acquire its rival Monsanto and finally won:  the deal valued at $66 billion was the largest deal of the year.

The takeover creates a vast conglomerate spanning pharmaceuticals, health products and pesticides which made regulators nervous enough to launch a complete investigation of the agribusiness and chemical industries and the impact such a mega deal would have on these sectors.

The acquisition needs approval from 30 authorities but at the time of this writing, is still very much on track.

The US is also expected to keep its position as the number one destination for deal activity.

Having outlined plans to slash the US corporate tax rate and allow for the repatriation of offshore funds, Mr. Trump’s presidency seems to support more domestic deal-making.

Lower corporate tax rates, immediate deduction of US capital expenditures and the potential for companies to repatriate funds from abroad provides quite a stimulus package for corporate mergers.

Maturing economic and M&A cycles should also support increased intra-European deal activity.  The acquisition of aerospace giant Zodiac Aerospace in France last year by even bigger player Safran, combined two market leaders to form the third largest aerospace company in the world.

The new entity marries Safran’s capabilities in landing gear, wheels and brakes, nacelles, power systems, actuation and avionics, with Zodiac’s leading position in seats, cabin interiors, power distribution, lighting, fuel, oxygen and fluid systems and safety equipment.

The combined group would have around 92,000 employees, c.a. €21.2 billion in adjusted revenues and c.a. €2.7 billion in adjusted recurring operating income.  It’s global footprint would expand to over 60 countries.- See more at: https://www.safran-group.com/media/safran-and-zodiac-aerospace-new-global-leader-aerospace-20170119#sthash.WefjOpQb.dpuf

Finally, US companies are hungry for European deals as well.  Peter Tague, co-head of global M&A at Citigroup Inc., has stated that US companies are not overly concerned by President Trump’s protectionist policies.

“What is going to be interesting is the disparity between rhetoric and what actually gets enacted,” Tague said. “Until policy is much more tangible in terms of scope and timing, lots of companies will spend time listening to Washington but few are going to hold their strategy hostage to it.”

“We remain extremely positive on the overall outlook for our M&A business” says Kurt Simon, global chairman of M&A at JPMorgan Chase.  As long as you have a strong transition team the future looks very bright.