Hirsutes of armour
A few hairy deals suggest a resurgence of animal spirits in the European boardroom. Royal Dutch Shell’s $70 billion-odd bid for BG and Nokia’s $17 billion move on rival Alcatel-Lucent are complex, if long-mooted, tie-ups finally coming to fruition. Last year’s $3.5 trillion merger boom was mostly an American affair. But if corporate bosses from London to Espoo to Turin are feeling this daring, Europe will soon account for its fair share.
Europe hasn’t been entirely devoid of bold deals in recent years. Think Glencore-Xstrata, the bloodied-but-unbowed Lafarge-Holcim, or transatlantic SNAFUs like Publicis-Omnicom. But the continent’s drawn-out crisis has kept many deals firmly in the pitch-books of investment bankers – until now.
To wit, Shell is pouncing on a rival hit harder by energy-market wobbles. Nokia and Alcatel, having put out a series of internal fires, have clinched an all-share combination tailored to keep France onside. The normally mild-mannered Agnelli family are breaking up an agreed marriage in the reinsurance business with their Exor vehicle’s hostile $6.4 billion bid for PartnerRe.
Activist investors have spurred many deals stateside, where they are much more potent. The dollar’s strength also makes it easier to see more American predators like FedEx reaching across the Atlantic as it did with TNT Express last week, rather than vice versa.
Still, with debt almost free, equity markets buoyant, sales growth elusive, and Europe’s economy rousing under the influence of the European Central Bank’s easy money policies, it’s not hard to see other “evergreen” combinations finally flowering, such as the sale of Telecom Italia to a French or German rival, to take one example.
History suggests there’s plenty of room for more. As of mid-March, deals involving Western European targets made up 23 percent of global deal-making, according to Datastream. In the two decades to 2010 the average was more like 30 percent, with four peaks close to 40 percent. You can almost hear the investment bankers whispering sweet carpe diems to their European clients.