FFooccuuss ooff EEu­ur­rooppeeaann MM&&AA ssh­hi­iffttss ttoo UUSS ccoommp­paan­ni­ieess

Financial Mirror (Cyprus) - - FRONT PAGE -

Euro­pean com­pa­nies are show­ing a greater ap­petite for US, ver­sus EU, com­pa­nies for ac­qui­si­tions, given the coun­try’s stronger growth prospects and cost com­pet­i­tive­ness, Moody’s In­vestors Ser­vice said in a spe­cial com­ment. In the first ten months of 2014, ac­qui­si­tions by Euro­pean com­pa­nies hit $788 bln, the high­est since 2008; with a no­table shift to­wards US tar­gets, ac­cord­ing to the re­port, en­ti­tled “Bet­ter US prospects spark height­ened in­ter­est by Euro­pean com­pa­nies.”

“The at­trac­tion of US com­pa­nies re­flects the US’s stronger growth prospects than the euro area, and its cost com­pet­i­tive­ness,” said Richard Mo­rawetz, co-au­thor of the re­port. “Ger­man com­pa­nies, in par­tic­u­lar, have led the ac­qui­si­tion of US as­sets with a num­ber of high-pro­file trans­ac­tions, in­clud­ing Merck KGaA’s $16.9 bln of­fer for Sigma-Aldrich Cor­po­ra­tion.”

This is the first year in the past decade in which North Amer­ica has over­taken Europe as the pri­mary des­ti­na­tion for Ger­man M&A ac­tiv­ity.

Moody’s notes that rat­ing ac­tions on th­ese larger ac­qui­si­tions have of­ten been neg­a­tive, re­flect­ing the largely debt-funded na­ture of the ac­qui­si­tions and the neg­a­tive im­pli­ca­tions for credit met­rics. How­ever, the agency ex­pects that the trans­ac­tions will bring ben­e­fits to the ac­quirer over the longer term, such as bet­ter earn­ings growth and lower pro­duc­tion costs. While fur­ther ap­pre­ci­a­tion of the US dol­lar would raise the cost of ac­qui­si­tions, this would be more rel­e­vant for com­pa­nies aim­ing to use the US as an ex­port base rather than for those seek­ing to take ad­van­tage of higher growth in that mar­ket.

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