As I have said before, it's a good time to be acquiring assets...

As I have said before, it's a good time to be acquiring assets in Europe!

http://www.bloomberg.com/news/2011-12-16/europe-s-crisis-may-hold-seeds-of-dealmaking-as-valuations-drop.html


U.S. and Asian companies seeking acquisitions in Europe may accelerate dealmaking next year after a slowdown in the second half, beckoned by a slumping euro and share prices depressed by the sovereign debt crisis.

Led by Johnson & Johnson’s $21.3 billion bid for Switzerland’s Synthes Inc. (SYST), announced takeovers in Europe by overseas companies rose by about 58 percent to $252 billion this year, data compiled by Bloomberg show. While acquisitions have declined since July, companies including General Electric Co. (GE), China’s HNA Group Co., and Japan’s Fast Retailing Co. (9983) have signaled an appetite for further takeovers in the region.

“There are well-positioned acquirers globally looking for bargains,” even if economic pressure has slowed recent European dealmaking, said Gregg Lemkau, head of mergers and acquisitions for Europe, the Middle East, Africa and Asia-Pacific at Goldman Sachs Group Inc. (GS) “One of the drivers in Europe has been historically low valuations and a relatively soft currency.”

Europe may offer the best bargains in more than 15 years. The MSCI Europe Index, a measure of 450 stocks, trades (MXEU) for 10.4 times reported earnings, showing equities in the region are cheaper than they’ve been 98 percent of the time since 1995, according to Bloomberg data.

The euro, meanwhile, has fallen by about 13 percent against the dollar since the sovereign debt crisis began two years ago, making conditions even more favorable for U.S. buyers. Potential Japanese acquirers have the advantage of a yen that has gained about 10 percent in the past six months against a benchmark basket of currencies including the euro.

Acquiring Technology
While few companies are clamoring for access to the European market itself, “in many cases, what overseas buyers are really acquiring in Europe is technology, or access to emerging markets,” said Giuseppe Monarchi, head of European M&A at Credit Suisse Group AG.

J&J’s planned purchase of Synthes will give the U.S. health-care products maker devices used to treat bone fractures and trauma, while Hewlett-Packard Co. (HPQ)’s $10.3 billion takeover of the U.K.’s Autonomy Corp. in November handed it data-sifting enterprise search technology helpful to cloud computing. In buying Luxembourg-based Skype Technologies SA for $8.5 billion in October, Microsoft Corp. (MSFT) absorbed the world’s biggest provider of Internet telephone service.

Emerging Markets
European companies have also tended to be more aggressive than their U.S. counterparts in expanding in markets like Africa and the Middle East, spending about $90 billion on deals in those regions since 2000, Bloomberg data show. That compares with about $50 billion of such takeovers by U.S. companies.

So far, access to those markets and technologies mean many European targets are still worth having. However, a protracted slowdown and a failure by European policy makers to resolve their fiscal challenges may damp the outlook for dealmaking.

A degree of reluctance to do deals will “likely persist until there’s some resolution to the debt crisis,” said Goldman Sachs’s Lemkau. “The interest is still there, but the volatility and uncertainty in the markets makes the likelihood of most acquirers taking action low.”

Moody’s Investors Service said Dec. 12 it will review the ratings of all European Union countries after a summit last week in Brussels failed to produce “decisive policy measures” to end the region’s debt crisis. Standard & Poor’s placed the ratings of 15 euro nations on review for possible downgrade on Dec. 5.

Slowing Pace
Dealmaking in Europe declined in the second half to the slowest pace since 2008, with foreign buyers announcing $86 billion of acquisitions, 48 percent less than in the first half, Bloomberg data show.

Still, many companies have recently expressed an interest in Europe. General Electric, based in Fairfield, Connecticut, said in November it’s targeting European deals as it seeks to compete with German rival Siemens AG. (SIE) Fast Retailing, owner of the Uniqlo fashion brand, is seeking European targets to offset stagnant sales at home, Chief Executive Officer Tadashi Yanai said last month. HNA, meanwhile, has said it has a $6 billion war chest for acquisitions in Europe and the U.S.

“The U.S. went into recession earlier than Europe and came out of it faster,” said David Silver, head of European investment banking at Milwaukee-based Robert W. Baird, which typically focuses on deals valued at as much as $1 billion. “American companies are armed with stronger balance sheets and want to deploy capital.”