Recent trends in cross-border mergers and acquisitions have revealed a renewed confidence in boardrooms, as 2014’s global M&A boom spreads to Europe and Asia. This is part of a larger post-2008 trend which has seen the share of international mergers increase dramatically.
The growth of cross-border M&A is part of a wider phenomenon of a growing internationalisation of industry and its consolidation. More competitive resource markets and increasingly integrated economies have led to the predominance and importance of multinational corporations. They are the primary players capable of wielding, exploiting and coordinating huge global value chains.
International corporate control
In line with the rise of cross-border M&A, the battle for corporate control between players based in different countries has increased with Europe and Asia-Pacific notably seeing growth in M&A deals. In the UK, although the total number of M&A transactions fell last year, the number of mid-market M&A transactions increased. Furthermore, 2014 saw a growing level of cross-border activity involving British companies.
According to the latest ONS figures for 2014, UK businesses made 105 overseas acquisitions in 2014 compared to just 58 in 2013. Furthermore, the UK was also a significant market for acquisitions by foreign companies with 98 acquisitions made in the UK by foreign companies. The US was the largest acquirer in the UK with 37 per cent of targets acquired by US based companies.
It has been noted that both the US and UK have become popular targets for foreign investors and that the level of cross-border M&A over the last few years have resulted in significant shifts in corporate control out of these two countries in absolute value terms. This is in contrast to the inbound value of corporate control experienced by acquiring countries like Japan, China, and India. However, research examining M&A transactions in UK and US’ in more details suggests that this is in part due to the extensive deal-making that occurs in those jurisdictions.
Key recent sector trends include the fast-growth of cross-border M&A in Healthcare, Consumer Goods and Retail while Telecommunications, Media and Technology (TMT) also remains a fertile area for deals. Recent highlights include US drug giant Pfizer’s failed takeover bid for the UK’s AstraZeneca. Meanwhile German software group SAP’s purchase of US tech business Concur provides evidence that TMT shows no sign of slowing as cyber security and data compliance threats force consolidation and convergence.
Although the overall number of M&A transactions in the UK did experience a significant fall in 2014 compared to recent years, business confidence remains high. Added to that, cross-border M&A bucked the overall trend with a slight increase year on year.
On a global level, 2015 is likely to see the improvements in liquid capital markets contribute to even further buoyant conditions for cross-border M&A. With interest rates low, improved debt financing and a resurgence of bank lending there promises to be a continuation of recent cross-border deal-making.