Falling interest rates and benign stock market conditions have created the perfect environment for take-private deals in Europe, the Middle East and Africa (EMEA).

Take-privates in the region are currently on pace for one of their best years in the past decade, contributing to an overall solid start to the year for M&A as a whole, according to Mergermarket data.

Some 76 take-private deals worth a combined USD 67bn have been announced in the first nine months of the year. The largest deal in this category announced year-to-date is Brookfield‘s proposed delisting of Paris-based renewable energy generator Neoen [EPA:NEOEN], worth EUR 9.2bn (USD 10bn) including debt.

The volume of EMEA take-private deals is already ahead of the USD 40bn across 58 deals announced in the whole of 2023.

That indicates the ten-year record of 82 take-private transactions – recorded in the M&A boom of 2021 – could be exceeded soon. And the USD 80bn record for deal volumes, set a year later in 2022, could also be under threat should market conditions remain favourable.

Positive conditions for take-private deals are due to a combination of factors including falling financing costs and a gradual recovery in investor sentiment as a whole.

The European Central Bank (ECB) began a new cycle of rate cuts in June, with a second cut in September leaving its baseline rate at 3.5%. A further cut could come as soon as this month. Meanwhile, the Bank of England began cutting rates in the UK in August, moving its benchmark rate to 5%.

Investor risk appetite is also improving, as evidenced by solid performance on global stock markets in recent years. The Stoxx 600, which tracks companies across Europe, is up around 8% year-to-date and close to all-time highs.

There are a variety of potential take-private candidates in Europe in the fourth quarter, as previously identified by Mergermarket analysis.

Auto parts maker Dowlais [LON:DWL], which has a market cap of GBP 740m, is trading at only 3x EBITDA and could be on the takeover radar amid financial sponsor appetite for deals in the sector.

Livestock breeding and genetic products biotech Genus [LON:GNS] has an attractive read-through from a GBP 4.9bn enterprise value takeover of peer Dechra last year by an EQT-led consortium.

And shares in veterinary practices and pet crematorium operator CVS Group [LON:CVSG] have been hurt by a review of its sector by the UK’s Competition and Markets Authority (CMA). That could put the business in the takeover window of a sector dominated by financial sponsor-backed companies.

M&A optimism, measured

Brisk take-private activity has contributed to a strong start to the year for M&A in EMEA as a whole.

Third quarter deal volumes in the region in the quarter were up 12% on the same period last year and in line with other quarters since the second half of 2022.

Sequentially, the third quarter was 33% lower than the second, falling to USD 186bn worth of deals spread over 3,274 deals, though historically it is common for M&A to slow down somewhat between the second and third quarter.

Overall, EMEA deal volumes were EUR 649bn in the first nine months of 2024, up 32% compared to the same period during 2023.

Europe accounted for 90% of EMEA deal volumes in the first three quarters of the year, followed by the Middle East (7%) and Africa (3%).

The region’s largest M&A transaction of the year so far is Adnoc’s EUR 14.7bn proposed acquisition of chemicals producer Covestro [ETR:1COV]. Terms on the deal were agreed last week after more than a year of talks.

Adnoc is likely to use Covestro as a platform for further acquisitions of European and US chemicals assets, according to a report on Mergermarket.

The bidder is committed to investing billions of dollars to diversify away from oil and gas. It aims to become a top-five global chemicals player.

It could have been an even bigger year for M&A in the EMEA region but a few high-profile lapsed deals.

REA Group’s [ASX:REA] attempted GBP 6.2bn (USD 8.2bn) takeover of Rightmove [LON:RMV] failed last week after the digital real estate platform’s board rejected four separate bids.

BHP [ASX:BHP] had a GBP 36bn bid for mining peer Anglo American [LON:AAL] rebuffed in May. And a possible offer for Naturgy [BME:NTGY] from UAE state-backed Taqa, expected to value the Madrid-based energy utility at around EUR 20bn, was not pursued.

But large cap deals including Covestro and Neoen have proved dealmakers can still get sizable transactions over the line, providing some optimism for the remainder of 2024.

With financing markets benign – and barring major shocks – 2024 is well on its way to being the best year for European take-privates in a decade.