Slump in acquisitions across Europe is sign of things to come
MERGERS and acquisitions around the world slowed to their most sluggish pace in four years in the first half of 2013, as recession-hit European companies put the brakes on transactions and their healthier US counterparts took a cautious approach amid market uncertainty.
Analysts say activity may slow down even more in the coming months. Outside of the US, confidence has yet to return to austerity-hit Europe, and many Asia-Pacific economies, such as China, have been slowing after years of blistering growth. With interest rates at historic lows, finance is cheap at the moment – but lots of chief executives are still taking a pause.
The number of deals completed across Europe fell by 43pc to a 16-year low.
The US market fared better, boosted by a handful of massive deals like Comcast's €12.7bn purchase of General Electric's stake in NBC Universal.
Irish declines exceeded the European average, with the Irish M&A volumes down by nearly half in the first six months of this year compared to 2012. There were 90 deals completed during the period, down 45pc compared to the first six months of last year.
Buyers of Irish companies mostly came from Canada, Hong Kong and the rest of Ireland during the period, while Irish buyers completing deals outside of the country focused on companies in the US, Austria, Hong Kong and the United Arab Emirates.
"Big, well-capitalised companies with strategic imperatives want to deploy their cash, want to take advantage of historically low interest rates, and during the first half of the year have put their money to work," said Paul Parker, head of M&A at Barclays. "It is still a tough environment for smaller companies."
Disagreements among buyers and sellers is also proving to be a major dealbreaker.
"The gap between buyers and sellers is wider than I've ever seen," said Michael Carr, head of Americas M&A at Goldman Sachs. "CEOs worry more than ever about how their deal are going to be perceived by existing shareholders, new shareholders and regulators," he added.
There were still bright spots in an otherwise poorly performing market. Globally, telecoms and healthcare deals boomed.
Bolstered by large transactions such as Liberty Global's acquisition of Virgin Media, the total value of all deals in the telecom sector reached $53.1bn (€40.6bn), up 34pc from a year earlier.
Phone company Three Ireland's purchase of Telefonica Ireland, the Irish operation of the Spanish telecoms giant, was the largest Irish deal in this sector since 2006.
Large healthchare deals included Valeant Pharmaceuticals's €6.7bn purchase of Bausch and Lomb – Waterford's biggest employer – and US drug manufacturer Actavis's purchase of Irish-based Warner Chilcott for €6.5bn. (Additional reporting by Reuters)