New opportunities for strategic acquisitions

think: act CONTENT

2007

Mergers & Acquisitions: Europe gains ground

Following the US financial crisis, the once overheated M&A market is cooling off. The good news? Acquisition premiums are falling and are creating new opportunities for strategic investors. Mergers and acquisitions are making a successful comeback and have become a key element of corporate growth strategies. And in recent years, European companies have emerged as increasingly strong players in the global M&A market. There are many reasons for this development. While Europe is currently experiencing a robust economic growth phase, its figures are nowhere near the rate of expansion in the world's boom regions. Organic growth alone can thus not meet investors' expectations. In addition, many companies responded to the 2000/2001 economic crisis by cutting costs, refocusing on their core activities and cleaning up their balance sheets. The successful implementation of these measures has now left them with assets to spare – and in many cases made them strong enough to enter he M&A arena as true global players. Their renewed strength also allows them to deliver expected returns and successfully defend themselves against takeover bids.

European companies have developed an excellent feel for how to select, acquire and integrate other firms. This is undoubtedly linked – at least in part – to the challenges they have long faced, situated as they are in such a fragmented geographic and cultural context. They have become singularly adept at buying and merging with the "right" companies. In 2006, the volume of M&A transactions actually overtook that of the USA. Merger and acquisition deals worth a total of USD 1.59 trillion were closed in Europe, against USD 1.54 trillion on the other side of the Atlantic.

Within the framework of our pan-European "Best of European Business" (BEB) competition, we closely examined the performance of 8,000 European companies. We analyzed five factors that are instrumental to the success of leading European M&A players. They have learned to turn their own domestic market into a strategic advantage in the context of cross-border, intra-European mergers. The findings of the BEB competition correlate closely with Roland Berger's experience over the past four decades, during which we supported countless companies through the acquisition and integration phases.