Deal Watch: Wave of M&A Hits European Companies

Editor’s Note: This article ties into a series on M&A trends for corporate lawyers. It pulls data from Bloomberg Law’s Corporate Transactions solution and the Bloomberg Terminal to gauge deal flow on a monthly basis.

When it comes to deals, the most money is flowing in the U.S., but the momentum is around European target companies, according to Bloomberg Law’s monthly deal trends data.

Target companies based in Europe proved to be hot regardless of their size, with the number of deals and the total aggregate value of those deals increasing for small, medium and large companies.

In the trailing 12 months through September, there were 265 large deals announced involving European target companies — with large defined as $500 million or more — with a total value of $747.43 billion. The number of large deals involving European target companies thus rose 22.69 percent from the previous year through September when there were just 216 deals.

Across the board, medium-sized deals — worth between $50 million and $500 million — involving European countries were also up: There were 680 deals with an aggregate value of $115.32 billion in the year’s time leading up to September 2015, up from 638 deals worth $112.11 billion compared to the previous year.

Small deals, worth less $50 million were also up, with 970 announcements worth $1.54 billion during the same time period, representing a 6.01 percent increase in the number of deals over the previous year.

Gar Bason, of Davis Polk & Wardwell, said he’s observed a general zest for deals among investors and executives. “Increased confidence translates into willingness to do deals at all deal-size points,” said Bason.

In the U.S., however, large deals remained hot while other areas cooled off when the data was sliced based on U.S. target companies. The total value of large deals with a U.S. target company shot up by 32.54 percent in a year-over-year comparison through September. There was 354 large deals with a total aggregate value of $1.67 trillion. Last year, during the same time period, there were 343 large deals worth $1.26 trillion in total. The average size of a large deal also jumped to $4.72 billion versus $3.67 billion through September last year — a 28.42 percent hop.

Both small- and medium-sized deals involving U.S. target companies declined, however. The number of medium-sized deals dropped 12.79 percent to 757 announcements from 868 a year earlier. The total value of those 757 deals declined by 13.38 percent to $131.43 billion from $151.73 billion. The number of small deals dropped by 8.86 percent to 1,070 from 1,174 and the total aggregate value declined by 3.41 percent to $1.81 billion.

The numbers were not quite as dramatic when large deals were filtered by U.S. buyer: There were 350 large deals worth $1.5 trillion and $4.29 billion on average. During the same period in 2014, there were 345 deals worth $1.37 trillion in total, and with the average deal at $3.97 billion. Overall, the total value of the deals grew by 9.49 percent and thew average size deal grew 7.92 percent.

“One thing we’ve seen with some degree of frequency during this recent M&A wave is the buyer’s stock price rising after a deal announcement, signaling broad shareholder support for transformational deals,” said Rick Climan, a Weil Gotshal & Manges partner in Silicon Valley.

Climan added, “I think we’ll see less of that if the current volatility in the equity market continues.”

Across the pond, the story was not so rosy when the data was filtered based on European buyers where there was an across the board drop in number of deals and the total aggregate value of those deals, regardless of the size of the deals. Small deals suffered the most precipitous decline with only 770 deals worth $1.11 billion compared to the 923 deals worth $1.38 billion completed during the same period in 2014 — a 16.58 percent drop in the number of deals and a 19.68 percent drop in the total aggregate value of said deals.