Last week's merger agreement between the boards of US gas giant Praxair (NYSE: PX) and German peer Linde (FRA: LIN) is set to create a company worth more than $70 billion. The deal follows months of wrangling, the revival of a previously failed bid, union protests in Germany and the departure of two members of Linde’s executive staff. The merger also highlights that Europe remains an attractive investment destination for buyers outside of the continent.
Completed M&A for European companies by non-European businesses
rose each year from 2010 to 2015, per the PitchBook Platform. And despite a dip in deal numbers last year, a different trend is showing how the nature of cross-border M&A into Europe is changing.
European M&A deals by non-European buyers
While overall deal volume has been declining, the amount being invested has been getting much larger. Of the top five deals in 2015, just one, the GE deal for Alstom’s power and grid business, would have made it into the top five deals of 2016. That acquisition was dwarfed by last year’s most valuable deal—SoftBank’s €28.6 billion acquisition of ARM—which was almost twice its size.
Largest European M&A deals with non-European buyers in 2016
Looking at deals in play, the numbers become even more astronomical. The $30 billion agreement between Johnson & Johnson and Actelion, ChemChina’s $43 billion takeover of Syngenta, and the sale of NXP Semiconductors to Qualcomm for $47 billion are just some of the bids in the process of completing.
Several factors are conspiring to bring about this trend. For one, unfavourable economic conditions have led to mass consolidation across a number of industries such as pharmaceuticals and oil & gas. Secondly, as seen with Tencent's takeover of games developer Supercell last year, Chinese interest—
although faltering—is still playing a large part in the upper echelons of European M&A. On top of this, prevailing low-interest rates are making the debt environment more friendly for big-ticket deals. Ball's £4.3 billion deal for Rexam, for example, was partially financed by a new $4.1 billion credit facility.