Stefan Brunnschweiler, Global Head of CMS Corporate/M&A at CMS, provided insights into the European mergers and acquisitions (M&A) market during his presentation to Argyle’s CLO membership at the 2017 Chief Legal Officer Leadership Forum in Chicago on November 30. In his presentation, “Changing Tides: European M&A Outlook 2017,” Brunnschweiler highlighted several notable trends in the European M&A sector.
M&A can be tricky, particularly for businesses that are exploring growth opportunities in Europe. Many factors impact companies’ decisions to pursue M&A opportunities. Much in the same vein, the European M&A market is affected by financial, political and other factors that can make it tough for companies to determine whether to invest in this sector.
The European M&A market is unlike other segments, and for good reason. It provides companies with the ability to capitalize on the European market and expand their global brands. At the same time, the European M&A sector sometimes creates risk, especially for companies that are pursuing opportunities in Europe for the first time.
There is no telling exactly how the European M&A market will turn out in the future. However, CMS has deployed a data-driven approach to assess the European M&A sector, and Brunnschweiler outlined some of the company’s findings from a recent market study.
According to Brunnschweiler, the European M&A market has experienced many ups and downs over the past year. The market fluctuates at times, but overall, appears to be growing.
“Many companies are acquiring startup companies. By acquiring [startup] companies, businesses are creating a startup atmosphere.”
Many businesses were skeptical about the European M&A market’s prospects in 2016. Conversely, these companies have shown that they are more willing to invest in the European M&A market this year.
European M&A market sentiment rose dramatically in 2017. Optimism is increasing across the European M&A market, and this trend bodes well for the sector’s future.
“The sentiment in Europe changed dramatically,” Brunnschweiler stated. “[The European M&A market] is now presenting a completely different picture. People are more positive than a year ago and believe the European M&A market will be going up.”
Meanwhile, political instability played a major role in the European M&A market this year. The political instability came from many sources and caused some companies to reconsider their decisions to invest in the European M&A sector.
Many companies are concerned about the political instability across various European nations. This instability continues to persist, and as such, may have far-flung effects on the European M&A market in the years to come.
“Political instability in Europe … has a great impact on the European market,” Brunnschweiler said. “[The political instability] creates insecurity that is not good for the European M&A market.”
In 2017, the United States has been a key proponent behind the growth of the European M&A market.
U.S. companies are investing heavily in the European M&A market. Furthermore, this trend is expected to continue in the foreseeable future.
“We expect a lot of U.S. companies to make a lot of acquisitions in Europe,” Brunnschweiler indicated.
Many U.S. companies are exploring investment opportunities in Europe. These businesses are willing to collaborate with European brands and allocate significant time and resources to understand all aspects of the European M&A market.
Moreover, U.S. businesses remain committed to the European M&A sector. The number of U.S. companies that invest in the European M&A segment may continue to increase as well.
“The U.S. has remained the most important market for European M&A,” Brunnschweiler noted. “Both inbound and outbound transactions are largely driven by the U.S.”
As companies explore opportunities to extend their global reach and bolster their earnings, the European M&A market could provide meaningful opportunities. In fact, this sector enables investors to seek out opportunities in a wide range of industries, including the consumer goods, financial services and transportation segments.
“The U.S. has remained the most important market for European M&A. Both inbound and outbound transactions are largely driven by the U.S.”
Moreover, many businesses are leveraging the European M&A market to transform their companies’ cultures.
Today’s businesses frequently want to deploy a “startup” culture within their respective companies. Yet doing so may prove to be exceedingly difficult.
Thanks in part to the European M&A market, companies can acquire startup businesses with successful cultures in place. That way, businesses can acquire – rather than develop – a startup culture.
“Many companies are acquiring startup companies. By acquiring [startup] companies, businesses are creating a startup atmosphere,” Brunnschweiler said. “Rather than building up their own startup culture, many businesses are trying to acquire it.”
Companies that decide to invest in the European M&A market may be able to capitalize on a thriving sector.
The European M&A market offers plenty of investment opportunities to companies around the globe. Businesses that explore these opportunities may be better equipped than other companies to drive revenue growth both now and in the future.
Stefan Brunnschweiler is the global head of the CMS Corporate/M&A Practice Area Group. In this position, he sets the strategy for the group and leads an international team of more than 350 partners and 1000 lawyers.
Stefan Brunnschweiler specializes in international and domestic mergers & acquisitions transactions, corporate restructurings, corporate law and general contract matters (e.g. joint ventures, partnerships and shareholders’ agreements). He is experienced in a broad range of national and international transactions both sell- and buy-side (including corporate auction processes) and the assistance of clients in their ongoing corporate and commercial activities.
For over a decade, Stefan Brunnschweiler has engaged in competition law including merger control filings.