European Equity Capital Markets: Growing Through Cross-Border M&A

Listed & Large Corporates, The Netherlands | Report | March 2023

The momentum for (cross-border) M&A should remain strong in 2023 as companies continue to look for growth and strategic transformation.

Global cross-border M&A activity has slightly decreased in 2022 compared to 2021, but is still above the 2020 level and similar to 2019 in terms of number of transactions, as can be read in our newsletter.

For 2023, considering buy-side M&A can be opportune as a result of lower valuation levels and less competition for potential targets. Temporary yet significant deviations from historic exchange rates may be a further driver for opportunistic cross-border buy-side M&A. Moreover, as the cost of debt financing has increased, listed companies will increasingly consider using their shares as M&A currency.

2023 has started optimistic for both the AEX and S&P Europe 350, following a significant downturn of European stock markets in 2022 caused by global uncertainty.

While European stock markets performed at all time high levels in 2021, the year 2022 was highly volatile. Global uncertainty caused a significant downturn of European stock markets in 2022, resulting in double digit losses.

The downturn was driven by the negative overall market sentiment primarily caused by the war in Ukraine, supply chain issues, the energy crises, high inflation and rising interest rates. Overall, these factors led to increasing concerns of a potential recession in Europe. For 2023, we expect interest rates, inflation and potential recessions to continue to drive market sentiment.

After being virtually closed for quite some time, equity capital markets are expected to cautiously re-open as market fundamentals are slowly moving in the right direction.

The European IPO market has experienced a disappointing year in 2022. In total, 102 IPOs raised EUR 15.6bn, compared to 422 IPOs raising EUR 75bn in 2021. Similar to the IPO market, the European follow-on market also experienced a decline in number of transactions as well as in terms of total proceeds in 2022, reflecting the difficult market circumstances to raise fresh equity. Nevertheless, multiple companies were still able to successfully tap the market.

In this report for the large and listed corporate sector, we discuss these developments, provide an update on the M&A and debt market and highlight specialist insights in cross-border (buy-side) M&A.