European corporates have had their most active year across both M&A and equity capital markets since 2021, though mounting fears over a frothy US stock market cloud future deal-making.

Just today (20 October), Kering and L’Oreal announced the sale of the former’s entire beauty division to the latter in a remarkable EUR 4bn deal.

The news is just the latest big strategic move among European corporates, with business leaders across the continent leaning into strategic M&A and large spending projects, often financing these plays through equity sales.

In fact, non-sponsor related ECM issuance in Europe YTD is just above USD 93bn, driven higher by large capital raises such as a EUR 5bn (USD 5.9bn) accelerated primary placement by Spanish-listed Iberdrola in July and a DKK 60bn (USD 9.4bn) rights issue from Denmark-listed wind energy generator Orsted.

The Orsted and Iberdrola transactions contributed to USD 45bn of primary follow-on capital raised by listed European corporates so far YTD, easily the best year-on-year total for the asset class since the boom years of 2020 and 2021.

“While there are a decent number of primary capital deals in Europe, there have been some very large deals which are pushing the value numbers far higher, which is a theme we saw at the start of last year,” said a European ECM banker.

Source: Dealogic data as of October 14

Alongside the primary capital raising, European-listed companies have been funding corporate growth through secondary sell-downs of non-core divisional holdings, such as German-listed Siemens selling a EUR 1.4bn (USD 1.5bn) slice of its Frankfurt-listed medical tech business Siemens Healthineers and Pfizer’s sell-downs of its holdings in London-listed Haleon.

The narrative this year is one of boardrooms moving to pull the trigger on transformational strategic investment, particularly in the infrastructure sector, where there has been significant spending growth.

This was the case with Iberdrola, which is using some of the proceeds from its mega-raise to part-fund substantial investment in UK and US infrastructure. Siemens was perfectly open about its desire to build a strategic M&A war-chest when monetising its Healthineers holdings.

“There has been a definite shift in boardrooms in wanting to move on big strategic decisions, be that on M&A and issuing primary equity capital to finance that, or other spending,” said a second ECM banker.

“Iberdrola was a great example of that with its decision to move ahead on a huge investment in the UK and we are seeing companies across industries very keen to move on these big strategic decisions.”

It’s perhaps unsurprising that boardrooms on both sides of the pond are so proactive, given the need to pursue scale as insulation from a more uncertain world. Dealmaking has increased in general across Europe this year, where corporates are responsible for EUR 395bn of announced M&A activity YTD, 12% higher than in the same period in 2024 and only just behind the blow-out year of, you guessed it, 2021.

Deep pools of capital

The institutional support for this spending has been tremendous, with shareholders backing boardroom boldness.

“The proactivity in board rooms is very encouraging, whether through action on M&A or financing large infrastructure projects via equity,” said an investor at a large institutional asset manager. “My only disappointment is we haven’t seen a lot more.

“There was a lot of this talk at the beginning of the year, which was then paused by Liberation Day and tariffs, with companies not wanting to make big decisions until they had more visibility. Hopefully, we will start to see more of now.”

But there are deep pools of support also to be found in private markets.

The decision to sell a minority stake in TenneT Germany to a private consortium of buyers rather than list the business seems a pivotal moment, given the roughly EUR 65bn of upgrades required across its grid in the next few years.

Deep-pocketed investors like APG, Singapore sovereign wealth fund GIC and Norges Bank Investment Management committing such substantial private capital to its capex plans augurs well for European corporates next year, particularly infrastructure businesses, in moving ahead on huge strategic projects.

“In the US there is an administration that is very ‘America First’-focused, and a real feeling from investors and the broader financial industry that a lot will happen in Europe and now is the time to be riding that wave,” said a senior European coverage banker.

Can European stocks weather the US storm?

However positive the picture around corporate Europe looks, it should not be assessed through rose-tinted glasses, with a weaker global macroeconomic outlook for 2026 and growing concerns over a stock market bubble the other side of the Atlantic.

There are three major contributors to these concerns. US President Donald Trump’s tariff policies, which returned with a vengeance at the beginning of October, the health of the US and global economy, and a growing fear over the sustainability of US artificial intelligence valuations, even as the technology cements itself into corporate workflows.

Third-quarter results so far are not showing any slowing of AI demand yet. Swiss-listed ABB pointed to surging US demand for data centres in its results, and, in its guidance, Nasdaq-listed Oracle’s results were supported by what it cited as ‘staggering’ AI Demand.

But despite the health of the industry in the last three months and a healthy backlog of orders, fears over an AI bubble were cited as the number one risk among fund managers interviewed for Bank of America’s October Global Fund Manager Survey.

Economic worries are also starting to be validated, particularly in US private credit, following the collapse of auto lender and car retailer Tricolor and the bankruptcy of auto parts maker First Brands.

European equities have proven popular this year as a counterweight to overallocation to a handful of mega-cap US tech stocks.

Should US stocks fall through, there would be a question whether Europe could weather that storm enough for corporates to continue their ambitious spending plans through next year. The party is clearly not over yet. While US stocks took a hit at the end of last week on private credit concerns, they quickly bounced off the lows, showing that investors are not willing to take risk off the table yet.

“The market generally feels frothy, but the reason they have been so strong is that if you are not fully invested, you would have done badly this year,” said the investor.

“The market seems to be in a bit of a holding pattern, but there is clearly risk. I would hope Europe could be insulated by it a bit, at least against AI, given the lack of that industry here, but when the US falls, everything here also tends to suffer.”

European corporates have a clear window to move ahead with transformational strategic spending and can fund it largely with equity, if they so choose, either public or private.

But if the music stops in the US, the European party could end early as well.