Business deals in Europe at lowest in 23 years

Andy Jalil

As the pandemic and resulting recession pushed bosses to preserve cash levels and hold off on acquisitions, European M&A deals crashed to a 23-year low in the second quarter. There was just one deal in Europe over $10bn in the three months from April to June – the merger of Telefonica’s and Liberty Global’s UK operations, with a combined value of almost $35bn. According to data from Refinitiv, in total across Europe, there were just 1,958 M&A deals unveiled in Europe during the second quarter.

A locked-down continent and executive focus on corporate survival helped drive down deals to the lowest number since the first quarter of 1997. Head of M&A for Europe, the Middle East and Africa at Citigroup, Alison Harding-Jones said: “There has been a meaningful slowdown in M&A activity. Before the crisis hit, there were a large number of deals due to come to market that were put on hold.”

Dealmaking on their own turf was one area where European banks managed to retain market share. The pandemic has now helped that slip away as well. Some bankers have said that European banks may never recover and that the hit caused by the latest turmoil may usher in a new era of American banking dominance. But the Americans are suffering too. The slump in Europe came amid a broader collapse in global dealmaking, the value of which plunged by 55 per cent compared with the same period last year.

Globally, M&A fell to an 11-year low during the Q2, with the total value of deals falling to $485.3bn. In the US – the biggest market for M&A deals in the world – the value of deals dropped to a 17-year low at $103.5bn, an 85 per cent decline on the same period in 2019.

The value of transactions in Europe during the second quarter, at $182.9bn, was the lowest second quarter total since 2016. However, this was skewed by one transaction: Unilever’s move in June to abandon its dual Anglo-Dutch corporate structure and become a single holding company based in the UK. Refinitiv counted this as a $106.9bn deal, the value of European M&A in Q2 declined by 62 per cent this year compared to the same period last year.

The value of deals worldwide, this year, dropped 41 per cent after several big-ticket acquisitions were stuck in the first quarter just before the pandemic went global. Private equity could boost dealmaking as companies look to deploy the $1.5tn of uninvested capital that they have amassed, according to data from Preqin.

“In the initial phase of the crisis, the key focus of private equity firms was understandably on securing the health and liquidity of their portfolio companies,” said Ina De, co-head of strategic investors group in EMEA (Europe, Middle East, Africa) at JP Morgan. Adding: “Helping look for opportunities to invest is a top priority and we are spending a great deal of our time identifying appealing assets for our clients to buy.”