US companies increase hunts for European M&A

The number of M&A deals so far this year involving US companies swallowing rivals in Europe jumped by 20% compared to the same period in 2010, as Americans see Continental rivals as attractive, and sometimes cheap, targets.

This year there have been 563 deals. They have been worth an aggregate $65bn, which is more than double (140%) last year’s figure, according to investment bank Robert W Baird.

The bank noted four deals it closed in October alone. Pennsylvania’s Ametek bought Swiss test group EM Test; Milwaukee’s Rexnord buying Germany’s VAG; Italy’s Robuschi purchase by Philadelphia’s Gardner Denver; and the UK’s Euro Car Parts to Chicago-based LKQ.

Robert W Baird attributed the activity to US companies having high and growing cash holdings, and having paid down debt.

David Silver, head of European investment banking at RW Baird (pictured), added recent volatility in debt markets and near-term economic uncertainty left Europe’s mid-market financial buyers “hamstrung”.

“Strategic buyers are proactively approaching targets. With more favorable borrowing costs, the need to look externally to generate top-line growth and their long-term view on commercial prospects, strategic buyers have been able to make attractive offers and move swiftly to complete deals.

“The recession seems to have hindered the ability of European strategics to compete with their US counterparts for certain targets. Acquisitions of European targets by European strategics this year has risen, but very modestly – about 5% – since this time last year. Total dollar volume for such acquisitions is down approximately 14% so far this year.

“US corporations, as a whole, responded very effectively during the most recent downturn. Profits and cash flow are up, debt is down and cash balances continue to grow. Under these conditions, acquisitions are a preferred approach to enhancing growth, and if managements are interested in accelerating growth in other geographies, the current environment represents an attractive opportunity to go looking for strategic assets in those geographies.”

It has not just been Americans buying Europeans, though.
The UK’s Barclays Private Equity France recently announced it had joined with ING Parcom Private Equity and management of Unither Pharmaceuticals to become principal shareholders of the healthcare company.

BPE bought a controlling stake for an undisclosed sum, alongside minority shareholders ING Parcom Private Equity, CM-CIC Investissement and Picardie Investissement.
Unither Pharmaceuticals provides dosage forms for European pharmaceutical laboratories and generic products, and it said the restructuring of its share capital would allow it to pursue organic and external growth over the next five years.

Eric Goupil, president, said: “Our financial partners, especially ING Parcom Private Equity, have enabled us to make a success of 2006-2011, which has been a significant period for the group’s development, marked in particular by the strategic acquisition of a site in Colomiers. The backing of Barclays Private Equity should enable us to continue this development and serve existing and future clients effectively in their specific markets.”

The investment was BPE’s fourth in the year, following acquisitions of Coventya, The Mill and IN tIME Express Logistik.


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