On September 25, 2018, Patrick Frowein, Member of the Management Committee Germany of Deutsche Bank, led the MuMAC audience through the recent developments in the European M&A market, concentrating on the impact of global and sectorial dynamics.
Currently global equities are at a new high. While US equities have continued to have an outstanding performance in 2018, European equities have recovered from a slight decline in the first quarter of 2018 and are expected to further increase during the rest of the year.
Equally, a new record year of M&A is coming up. The volatility of the market has decreased after recent spikes, leaving the VIX index at about 12 in September 2018, a considerable decline from the high of more than 30 in February 2018, although at an higher level than in 2017. Bond yields are still low but increasing.
In spite of these positive observations, recent political events and developments, such as the newly adopted trade policies and the looming Brexit, remain relevant risk factors.
It is noteworthy, that there is a broad base of activity across global sectors. Nevertheless, there is an underrepresentation of the technology sector in Europe.
As result the European M&A volume of the technology sector only amounted to 9 percent in 2017. According to Frowein, this could change at the hands of recent and future developments in the automotive sector, as autonomous driving, shared mobility and electric vehicles become increasingly crucial.
Globally the value of cross-sector deals into the technology sector have been rapidly increasing since 2015. Nevertheless, this does not apply to Europe. Frowein pointed out, that Europe had to change its attitude toward this development and embrace investing in the technology sector in order to keep up with other nations. This is especially crucial at a time where the technology sector can no longer be viewed separately, but finds itself more and more intertwined with other sectors.
Finally, Patrick Frowein mentioned the emergence of new trends in the M&A Market, such as the increasing focus on portfolios acting as a catalyst for M&A transactions, shareholder activism increasingly triggering M&A transactions and the need to create a global champion, currently hindered by European competition law.