After a dip in 2023, European M&A activity has regained momentum in the past six months, propelled by strategic acquisitions in high-growth sectors and the expectation of interest rates easing soon.

In Q1 2024, there were 2,912 M&A deals valued at EUR 168bn, up 42% in volume but down 27% by deal count.

The significant increase in volume is largely due to a return of big-ticket transactions, with 17 deals valued above EUR 2bn, worth EUR 78bn, recorded in the past three months, compared to seven deals worth EUR 24bn in 1Q23.

The UK had the highest volume of deals (EUR 51bn) in the region, over double the volumes in 1Q23.

The Bank of England announced in March that it was holding its interest rate at a 16-year high of 5.25%, but with rate cuts expected later this year, deal flow should remain solid in the coming months.

Healthcare was the largest deal sector in the UK, with EUR 22.8bn worth of deals, followed by Technology (EUR 21.7bn).

Private Equity’s resilience

Private equity funds continued to pursue inventive strategies to get deals over the finish line, including increasing their monetary commitments, obtaining minority stakes, and purchasing their own assets through continuation funds. A recent example of this would be Abenex’s reinvestment in Europa Group, a French healthcare-focused media and events company, through a continuation fund in March 2024.

Meanwhile, France-headquartered private equity firm Astorg is targeting EUR 800m for its debut GP Equity Solutions fund, a vehicle dedicated to continuation fund transactions.

Financial sponsor buyouts in 1Q24 stood at EUR 17.1bn, compared with EUR 9.6bn in 1Q23. However, exits slumped by 32% compared with EUR 13.2bn in 1Q23. PE activity is predicted to have an upturn in 2024, with a strong pipeline of deals already building.

Corporate divestments on a rise

Due to difficult economic circumstances, companies are conducting divestments and carve-outs to focus on core competencies, raise capital and then re-invest the proceeds.

Corporate separations in the pipeline include Hotelplan Group with parent Migros Group, a Swiss retail conglomerate, appointing Houlihan Lokey in March 2024 to oversee the divestment. Swedish IT company Sileon announced in February 2024 that it is considering the sale of its Payments and Processing division.

Orsted [CPH:ORSTED], the Denmark-based energy company, announced the start of a DKK 115bn (EUR 15.4bn) divestment programme, and plans to exit several markets, in February 2024.

In 1Q24, 613 corporate divestment deals were announced, valued at EUR 84bn, up by 65% compared with last year.

The largest divestment in EMEA in 1Q was the ongoing sale of three fill-finish sites of Catalent, by Novo Holdings, for EUR 10.2bn; it was also the largest deal in the region in the first quarter.

Meanwhile, other notable separation plans include the sale of Vodafone Italia by Vodafone Group [LON:VOD] to Swisscom [SWX:SCMN] for EUR 8.5bn which was announced in March 2024.

Road ahead

As M&A begins to stabilise, deals which were abandoned due to valuation constraints, will come back to the market.

This includes French contract development manufacturing organisation (CDMO) Synerlab, owned by 21Invest which first attempted to sell the company in 2020.

Also, OTPP and Ardagh-backed Dutch packaging group Trivium Packaging, which was on the market in 2022 with Elliott, Lone Star, Apollo in the final round, is set for a return. The sale of Ardian-backed French medical biology laboratories operator Inovie is also set to be relaunched. Its last sale attempt in 2022 had TPG Capital, CVC and Antin in the auction.

Apart from this, few other companies that are likely to come up for sale according to Mergermarket‘s Likely to Exit (LTE) predictive algorithm are Italian leather tanning company Rino Mastrotto Group with a score of 75 out of 100, Italian organic chemical manufacturer Industria Chimica Emiliana (LTE score of 72) and French plastic packaging solutions provider Axilone (LTE score of 67)