Is corporate deal activity a proxy for confidence? If so, Europe is having an anxiety attack of Edvard Munch proportions. The value of mergers and acquisitions in the region (for European targets) was $380bn in the first nine months of 2013, according to Thomson Reuters data out today. That is the lowest level in the first nine months of any year since 2004, and down a quarter on the same period in 2012.
True, M&A figures are easily skewed by a few big transactions: the latest US figures are bolstered by the $124bn Verizon Wireless stake transfer, for example. Still, Europe’s tumble contrasts with flattish but recovering M&A trends globally.
At first glance, this is surprising. Economic conditions in Europe may be weak, but they are stabilising. Its non-financial companies are cashed-up, reportedly sitting on more than €1tn at the start of the year. And valuations are not exorbitant. The 2013 price-earnings multiple on the Stoxx 600 is 14 – below both the S&P 500’s 15-16 times and glitzier figures seen in the mid to late-2000s.