The return of big-ticket deals, a recovery in buyout activity, and higher inbound appetite are signs that European M&A is on the mend and that the expectations of sellers and buyers are slowly starting to align.

In 1H24, Europe, the Middle East, and Africa (EMEA) registered deal volume of EUR 420bn across 6,995 transactions, a 38% increase on the historically low 1H23, according to Mergermarket data.

The increase in volume is largely due to a return of big-ticket deals, with 43 transactions valued at EUR 2bn-plus in 1H24. These contributed more than EUR 203bn to the total – almost double EUR 101.8bn over 24 deals in this segment in the same period last year.

The technology sector recorded the largest volume with EUR 68.6bn worth of deals, followed by the financial services sector with EUR 46.8bn.

The proposed acquisition of Banco de Sabadell [BME:SAB] by larger Spanish peer BBVA [BME:BBVA] for EUR 11.4bn, announced in May, was the second-largest deal in 1H24. The competition review could take eight months, as reported.

The completion of this deal could precede further consolidation moves among financial institutions. The Italian banking sector is already under consolidation and French President Emmanuel Macron recently raised the possibility of mega-mergers between European banks.

PE comeback

Buyout activity has also increased with private equity (PE) houses seeking to invest the huge amount of dry powder they have accumulated in recent years. Financial sponsor buyouts worth EUR 95.6bn were registered across 605 deals in 1H24 which has more than doubled the volume registered in 1H23.

Exits, on the other hand, have just risen by 8% compared to 1H23. Indeed, many sponsors are opting for other monetization routes like continuation funds or awaiting an expected market pick-up later in the year. Portobello Capital and GREENPEAK Partners, among others, have recently launched continuation funds and PAI Partners was also in discussion with investors about a new continuation fund.

UK-US love affair

M&A activity in the UK, where a general election is scheduled on 4 July, is on the rise again, following a slump in 2023. Stabilising interest rates and a high number of potential targets have helped the country take over China as the world’s second-largest M&A market with EUR 109bn worth of deals recorded in 1H24.

By volume, inbound deals accounted for 41% of all deals struck in the UK in 1H24; and more than 44% of all inbound transactions were performed by US-based acquirers, including the largest deal in the UK in 1H24, the EUR 9.8bn acquisition of packaging firm, DS Smith [LON:SMDS] by International Papers [NYSE:IP] announced in March.

Upcoming Pipeline

The pipeline in EMEA is active with a lot of big-ticket deals expected to be struck in the second half of the year.

Bain and Cinven-backed Germany-based generic drugmaker Stada Arzneimittel is already on the market. Other healthcare companies in the pipeline includes Sweden based-Karo Healthcare and Italy-based Hippocrates Holding.

The edtech sector is also expected to fuel the M&A pipeline with Nord Anglia Education (valued around  USD 15bn), AD Education, Globeducate and Cognita already on the market.

Other companies which, according to Mergermarket’s Likely to Exit (LTE) algorithm, could soon come up for sale include Belgium-based medtech firm Corilus (LTE score of 79) backed by Rivean Capital; and Spain-based specialist in mobile phone accessories La Casa de las Carcasas [LTE score 78], backed by ProA Capital.

Barring shocks in the Middle East, the EMEA M&A market should return to full health in the months ahead, particularly as the European Central Bank and Bank of England cut baseline rates.

*Mergermarket’s LTE predictive analytics assign a score to sponsor-backed companies to help track and predict when an exit could occur through M&A, an IPO, a direct listing or a deSPAC transaction.