Clifford Chance

M&A sentiment in Europe continues to be positive for industrials sector

The global industrials sector will continue to be interested in European M&A over the next few years, despite the challenging economic situation in the region. In fact, around 40% of respondents to Clifford Chance's European M&A: On the road to recovery? survey from the industrials sector say that the socio-economic uncertainty has actually increased their appetite for M&A deals in Europe, while only 20% say that it has deterred them.

The industrials sector considers Europe to be an attractive place to conduct M&A due to its highly developed infrastructure (such as transport, energy and technology) (37%) as well as the availability of skilled talent (35%) and access to developed technological know-how (35%).

The survey, conducted by the Economist Intelligence Unit (EIU) on behalf of Clifford Chance, canvassed the views of senior executives at close to 400 large companies globally from a wide range of industries, including the industrials sector. Over one-half of companies represented in the survey have annual revenues in excess of US$1 billion.

Over a third (43%) of industrials respondents said the main driver for pursuing M&A opportunities in Europe is to secure unique know-how, expertise and technology and thereby eliminate IP risks while 29% said it would be to gain market share in existing markets.

Europe came second (33%) in terms of having the most potential growth and attractive M&A opportunities behind Asia Pacific which was the top region of choice (55%) by industrials respondents. The Americas came third at 29% and the Middle East/Africa last at 16%. Asia, and in particular, Greater China, is expected to become a major market for industrials M&A by European companies in future, mainly in view of their ambition to enter high-growth markets.

Commenting on the results of the survey from the sector's perspective, Clifford Chance's global head of Industrials, Dr. Christof-Ulrich Goldschimdt, said:

"Economic instability has slowed down M&A activity in Europe but at the same time increased the appetite to pursue European transactions. Low M&A activity had led to a "deal jam" which should result in a significant increase in M&A deals in the future.

Despite the continuing difficult economic situation, market sentiment is positive. Significant cash reserves and an increasing willingness to pursue M&A transactions in general, both on the buy-side and on the sell-side, suggest that a market upturn is not too far away."