2012Trans-Atlantic Markets Draw Most Merger Deals
By: JESSICA HALL
Reuters
October 7, 2010
NEW YORK, Oct 7 (Reuters) - The mature markets of the U.S. and Britain remain the most active for merger activity, with deal volume doubling in the past year, as corporations seek existing products and established brands to build growth. For the first nine months of the year, the United States and Britain were the busiest nations for M&A -- with the most acquisitive and targeted companies -- accounting for 36 percent of all acquisitions, according to Thomson Reuters.
If you're looking for globalization, you're looking for companies that are established leaders or have established products,' said Morton Pierce, chairman of law firm Dewey & LeBoeuf's mergers and acquisitions group. 'If you're looking for growth, you want to find existing products you can plug into your company and sell them into emerging markets. You're not going to find existing products in the emerging markets -- you're going to find them in the mature markets,' Pierce said.
Trans-Atlantic deal activity this week alone included Sanofi-Aventis' hostile bid for Genzyme Corp and Johnson & Johnson's $2.4 billion takeover of Dutch vaccines group Crucell. Meanwhile, General Electric Co tried, but was spurned, in its effort to build up its industrial businesses as British oilfield services Wellstream Holdings Plc rejected a $1.2 billion (755 million pound) takeover approach.
European companies' M&A spending in the United States has outpaced that of their U.S. counterparts in Europe, data from Thomson Reuters showed. European companies have done more than $143.8 billion in U.S. and Canadian transactions, compared with just $59.5 billion in European M&A deals by U.S. and Canadian companies, according to Thomson Reuters.
The U.S. is the largest debtor nation and the U.K. is a large debtor as well. As you start to see a return to M&A activity, you are seeing the debtors selling assets,' said Marshall Sonenshine, chairman of boutique investment bank Sonenshine Partners in New York. 'It's part of the de-leveraging process mandated by the financial crisis.'
The rise in trans-Atlantic deal activity also comes amid a jump in overall cross-border volume and a general recovery in total M&A activity. So far this year, total cross border deals totaled $762.8 million, up 93 percent from the same period a year ago, according to data from Thomson Reuters. The number of deals totaled 8,539, up from 7,137 a year ago. 'Companies are going after established distribution channels. They're buying brands, technology and taking out key rivals,' said Paul Lin, partner with Jones Day.
The tally for cross-border deals this year, however, falls below the level seen in 2008 and is about half of the volume seen during the M&A peak of 2007, according to Thomson Reuters.
The trend over the last decade has been for an increase in cross-border activity, but the type of cross border activity we're seeing has been changing,' said Francis Aquila, a mergers and acquisitions attorney at Sullivan & Cromwell in New York. 'Traditionally, it was U.S. and European companies doing trans-Atlantic deals. What we're seeing today is companies from Brazil, China, Japan and other parts of the globe becoming increasingly acquisitive,' Aquila said.
The third quarter marked the sixth consecutive quarter for increased cross-border traffic, according to Thomson Reuters. Cross-border activity rose by a third from the second quarter of 2010 and showed the largest quarterly volume since the third quarter of 2008. The biggest cross-border deals have reflected general M&A trends, with energy, power, raw materials and health care among the busiest sectors. The year's biggest cross-border bids have included BHP Billiton PLC's $39 billion effort to buy Potash Corp, the tie-up between France's GDF Suez and Britain's International Power, and Sanofi's hostile bid for Genzyme.
As economies and countries are becoming more sophisticated and global in nature, they are becoming more focused on acquisitions outside their home market,' Aquila said.
Sonenshine Partners is a leading independent investment bank focused on providing integrated strategic, financial and corporate advisory services. The firm was founded in 2000 and is headquartered in New York City.