Cross-border M&A between US and Europe surging; encouraged by US Debt Issuance

  • Unprecedented US issuance in European leveraged loan and high yield market
  • US investment in Europe increased 108.4% in terms of value since start of 2017
London/New York: 5 September 2017  
Acuris, the leading provider of business intelligence and research for fixed income, transactions, compliance and equities, has released data from its Mergermarket and Debtwire products, indicating a significant rise in inbound debt issuance and M&A activity from the USA to Europe.
Cross border M&A already at EUR 149.7 billion in 2017 but corresponding debt issuance falls
Despite an increase in US M&A investment in Europe by 108.4% in 2017, as compared to the same period in 2016, this trend appears to have reversed on the debt financing side. ‘Reverse yankee’ issuance (euro denominated debt issued by US companies in Europe) for M&A in 2016 reached EUR 12.1 billion yet the equivalent YTD volume in 2017 is just EUR 2.1 billion, an 83% drop on a like-for-like basis. This is against a background of overall ‘reverse yankee’ issuance continuing to increase.
 ‘Reverse yankee’ volumes reached EUR 28.7 billion in 2016 with more to come in 2017
As the cost of borrowing in USD and EUR markets has widened, US issuers have targeted European leveraged loan and high yield markets, with ‘reverse yankee’ volumes almost doubling in 2016 to EUR 28.7 billion. On a year-on-year basis, 2017 volumes have been even stronger with loan issuance 148% higher and high yield bond issuance 31% higher (YTD) with refinancing being the main driver of issuance.
Darren Maharaj, Manager of EMEA Fixed Income Data at Debtwire, commented:
“The ‘reverse yankee’ trend has brought a significant amount of paper into the European market with 2017 set to surpass last year, driven by a favourable environment for refinancing in Euros.  Although far less of this leveraged debt is being used for acquisitions in 2017, this isn’t surprising when you consider most of the larger M&A deals are coming from  investment grade bidders.”
European M&A activity in 2017 reached its second highest YTD level on Mergermarket record, with total deal value hitting EUR 494.1 billion across 3,806 deals – an increase of 17.9% on the same period in 2016. Mergermarket analysis accredits this to a growth in market confidence following centrist election victories in France and the Netherlands, as well as to US investment, which has been a key driver, accounting for 30.3% of total European deal activity by value.
So far in 2017, US-based firms have participated in 412 transactions with European targets, at a total disclosed value of EUR 149.7 billion. This represents the highest YTD value of US M&A activity in Europe on Mergermarket record, eclipsing 2007, in which 313 deals were valued at EUR 103.6 billion. In turn, total European inbound M&A stood at EUR 214.6 billion across 716 deals, up 4.9% by value on YTD 2016.
Commenting on the findings,  Kathleen Van Aerden, Head of Research EMEA at Mergermarket, said:
“The first six months of 2017, and particularly the second quarter, saw a clear resurgence in European M&A activity – with particular interest from the US. While the year started with worry over potential populist shocks there now appears to be greater confidence in the market, which has resulted in greater foreign investment. With the region also posting strong GDP figures, the uptick seen so far this year shows no signs of slowing.”
The UK represents a 24.1% share of the total European inbound value so far this year. The UK received 225 deals from outside Europe, worth a total EUR 51.7 billion, representing a 12.6% drop by deal value compared to 2016 (YTD). In 2016 there were 235 deals announced, worth a total EUR 59.1 billion. Six of the largest 10 deals from outside Europe targeting the UK have been conducted by US-based bidders, including takeovers of Weetabix and Jimmy Choo. However, the largest deal targeting the UK this year saw China Investment Corporation acquire LogiCor Europe for EUR 12.3 billion.
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