North America fuels Q2 rise in global M&A deals

AP News
Posted: Jun 26, 2012 7:12 PM
North America fuels Q2 rise in global M&A deals

LONDON (AP) — North American businesses led a global increase in corporate deals during the second quarter, offsetting another decline in crisis-afflicted Europe, a consultancy said Wednesday.

In its quarterly tracker of mergers and acquisitions, or M&A, Ernst & Young found that the volume of announced deals in the second quarter rose by 10 percent from the previous three-month period. That increase followed four straight quarters of decline.

North America saw a 13 percent increase in quarterly bid volumes but activity in the 17-country eurozone remained weak. There, volumes were down 17 percent as the single currency bloc was buffeted by continued market volatility and increased political instability, particularly in Greece. The level of activity in the eurozone was the lowest since Ernst & Young started monitoring M&A levels at the start of 2010.

"Ongoing market uncertainty has clearly restrained eurozone M&A activity in Q2 of 2012," said Dave Murray, European M&A markets partner at Ernst & Young. "That said, the small upswing in average bid value and a strong pipeline of mega deals could indicate an increasing level of potential confidence."

Notable deals announced during the quarter included Nestle's $11.9 billion offer for children's food maker Pfizer Nutrition and global power provider Eaton Corp.'s $11.5 billion offer for electrical equipment maker Cooper Industries.

Despite the improvement, Ernst & Young said global M&A volumes during the quarter were still at their second lowest since the first quarter of 2010, when the Greek debt crisis first flared up. And though the value of bids increased by 18 percent on a quarterly basis, the average was still 22 percent below the same period the year before.

The survey also showed that the economic uncertainty around the world has made it more difficult for firms to complete their deals.

"Fewer transactions have closed in the quarter during which they were announced," said Murray. "Deals are taking longer and becoming increasingly difficult to complete, which increases the need for careful planning and diligence."

Murray said monitoring the progress of deals over the coming months will be an important gauge of the state of the global economy.

"If these deals do get across the line, we can infer a return in market confidence and renewed appetite to get deals done," he said.