Contrasting Trends Concerning Mergers and Acqusitions in the EU and the USA

The number of mergers and acquisitions carried out by acquiring firms from the European Union in the last twelve months reached a new peak at more than 20,000 transactions. The number of transactions thus even exceeds the boom of the new economy about five years ago by more than twice its magnitude.

Contrastingly, US American firms proved much more reserved with only about 10,000 transactions during this time period, although both economic regions are nearly equal in size with a gross national product of roughly 11 trillion Euros in 2005. This is the result of an analysis of worldwide mergers and acquisitions by the Centre for European Economic Research (ZEW) in Mannheim, Germany, based on the ZEPHYR database by Bureau van Dijk Electronic Publishing.

In contrast to the number, the value of all mergers and acquisitions (M&A) amounts to 700 billion Euros in both the European Union as well as the United States. European mergers are therefore on average only half the size of those in the United States. In doing so the firms pursue the increasing unification of the European economic sphere towards a common market, which in the United States has been the reality for more than one hundred years. It is furthermore noticeable that the discrepancy between the European Union and the United States is growing. Whereas the number of transactions in the United States has merely increased by 25 percent since the year 2000, the number in the European Union grew by more than 100 percent. This indicates that European as opposed to US American firms adhere to a different strategy. It is aimed at smaller transactions to deliberately access growth potentials, for example via technology acquisitions, and remove inefficiencies. "Megamergers" on the other hand first of all characterise the M&A market in the United States. US American firms are primarily interested in increasing market power through larger transactions. An ending to these opposing trends is so far not discernible.

Contact

Dr. Christoph Grimpe, E-Mail: grimpe@zew.de