Cross-border M&A activity has turned positive for North America after seven straight years of net flows in favour of Europe.
In its Global M&A Report for Q1 2024, PitchBook details mergers and acquisitions momentum fading throughout 2023, following a record 2022 when cross-border acquirers accounted for 26.7% of all M&A in Europe, or $281.6 billion gross and $106.6 billion net after offsetting flows to North America.
“We could see the momentum fading throughout 2023, following a record 2022 when cross-border acquirers accounted for 26.7% of all M&A in Europe, or $281.6 billion gross and $106.6 billion net after offsetting flows to North America,” the report says.
“That record share was reached as the dollar gained 20% to 30% against the euro and pound sterling, providing US acquirers with more buying power. Adding fuel to the fire, European targets were consistently priced lower at an average discount of 14.8% during the same span.
“More recently, prospects for the US economy have brightened relative to other regions”
However, the dollar rally fizzled in late 2022, and net flows to Europe have diminished ever since. More recently, prospects for the US economy have brightened relative to other regions. The combination of better growth at home and less purchasing power abroad has stemmed the tide of US M&A capital to European shores, at least for the time being.”
Globally, however, dealmaking is slowly on the mend after two consecutive years of declines, as reported by this news service. Deal activity rose 5% to 10% year-on-year in Q1 2024, despite falling short of Q4 2023 totals.
PitchBook reports North America and Europe transaction multiples “moved sideways” in Q1 2024 with the median EV/EBITDA multiple for M&A announced or closed in Q1 relatively unchanged at 9.4x versus 9.5x in 2023. EV/revenue multiples were also unchanged at a median of 1.6x in the first quarter, which was identical to last year’s median.
Meanwhile, M&A in Asia-Pacific’s finance sector is unlikely to pick up in the near-term as economic uncertainties, higher funding costs, and ongoing geopolitical risks dent dealmakers’ confidence.
Deal volume in the sector dropped almost 14% year-on-year during the first quarter, dragged by declines in mainland China and Australia, according to S&P Global Market Intelligence data.
Yet turnaround in Australia’s M&A is expected as potential bidders adjust to greater certainty on interest rates, says Mayer Brown Partner Justin Tan, adding that deals are likely to remain muted in mainland China due to uncertainties around its growth outlook.
The International Monetary Fund forecasts China’s GDP to grow 4.6% in 2024.
Write to Adam Orlando at Mining.com.au
Images: Unsplash
