Digitalization will be the key driver for European buyers over the next twelve months.
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The European M&A market is showing signs of recovery and deal volume in Europe will increase over the next twelve months. This is what almost two-thirds of dealmakers expect, according to the latest edition of the 'European M&A Outlook' from international law firm CMS and Mergermarket.
This is a big turnaround from last year, when only three percent predicted a significant increase.
The report provides a comprehensive description of transaction sentiment in the European M&A market. The report details the expectations of executives from 330 companies and private equity firms in Europe, the Americas and Asia Pacific for the European M&A market in the coming year.
Increase in total transaction value
After a few challenging years for the European M&A market, the first half of 2024 showed signs of recovery. The total transaction value in the first half of 2024 amounted to 439 billion euros compared to 334 billion euros in the first six months of 2023, an increase of 31 percent.
However, the number of transactions fell to 7,868 deals in the same period, a drop of eight percent compared to 8,579 deals in the first half of 2023.
“We are seeing an increase in larger transactions and expect this development to continue over the next twelve months,” says Pieter van Duijvenvoorde, Partner and Head of the Corporate/M&A Practice Group at CMS. “This is partly driven by more deal activity within sectors such as TMT and Life Sciences & Healthcare. Challenges remain, including in attracting transaction financing and differences in expectations regarding valuations between buyers and sellers.”
Interest from foreign buyers
Nearly a fifth of respondents (17 percent) expect digitalization to be the main driver for buyers in Europe over the next twelve months. Other important drivers of mergers and acquisitions are expected to be distressed opportunities (14 percent) and increasing interest from foreign buyers (also 14 percent).
For example, investors from the Middle East are looking to Europe for deal opportunities. Between 2016-2021, the average total value of deals in Western Europe with Middle Eastern buyers was almost 6 billion dollars per year. But in the first six months of 2024 alone, this was almost 23.3 billion dollars.
The biggest obstacle to transactions in the next twelve months, according to almost a quarter (24 percent) of respondents, is the mismatch of expectations about valuation between buyers and sellers. As public market indices have risen over the past year, company valuations have remained high despite higher financing costs in the current uncertain economic environment.
