Home Business Cross-border mid-market M&A deals showing encouraging signs of recovery

Cross-border mid-market M&A deals showing encouraging signs of recovery

Net buyers in North America are targeting IT and healthcare sectors with cross-border mid-market transactions averaging almost €50m

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The niche area of cross-border mid-cap mergers and acquisitions is showing remarkable resilience as the wider market recovers, according to new research undertaken by Belgium’s Vlerick Business School for Moore Global, the global accounting, audit, and advisory network.

According to the Moore Global Cross-border Mid-market M&A Compass, while the general M&A market is signaling a comeback from 2020 lows with 3% growth in 2021, so too is the specific area of cross-border mid-market deals (€10-€200m) with an increase in both frequency and value. At the smaller end of the market, the opposite is happening, with deal volumes and values decreasing.

Philippe Craninx, Moore Global Corporate Finance sector leader, said: “Cross border mid-market M&A is often reported as part of the bigger picture, but at a consistent 12% of the total global M&A market, it deserves to stand alone. So many businesses fall into this category, and their focus has switched from survival to dealmaking.

“These deals are often complex and involve an entrepreneurial or family business – and therefore have a broad set of cultural and personal aspects in comparison to the large-cap sector. By shining a light on this mid-market activity, we can uncover important patterns that will impact the way these businesses plan for the future, particularly as global markets focus on post-Covid recovery.

“Importantly, we can see where cross-border deals are being done, what type of companies are attractive mid-market M&A targets, and for which organizations. This research tells us that North America represents the primary ‘net buyer’, releasing more than 50% of deal value and volume. As the principal acquirers, they are mostly targeting IT and healthcare businesses – predominantly in China, the UK, the Netherlands, Israel, and France. This is important information for companies in those sectors looking beyond recovery to potential exit or targeting significant growth.”

The research also found:

  • European cross-border acquirers are far more likely to stay within the confines of the same continent and European targets are attracting interest in the chemical and non-metallic products industry.

  • 4,826 cross-border mid-market deals were done in 2021, compared with 4,661 in 2020 and 6,064 in 2019.

  • The IT sector is by far the most likely to feature in cross-border mid-market M&As, accounting for 42% of deal volume in 2021 with an average value of €49.2m. However, deals in the healthcare sector are also on the rise, accounting for 12%. Importantly, healthcare deals are performing strongly in terms of value, with the highest average at €52.7m.

“The report’s findings mirror our experience remarkably closely,” says John Cowie, Corporate Finance Partner at Moore Kingston Smith, a founding member of Moore Global Corporate Finance based in the UK. “We’ve completed numerous mid-market M&A deals in recent years, many having a cross border element to them, with the majority of buyers from the US. We’ve seen this in sectors as diverse as commodities broking, financial services and children’s entertainment, so it’s not exclusively IT and healthcare enjoying the benefits of this trend. The global nature of business means that, even in the mid-market, buyers have to look overseas to fulfill their growth ambitions which is clearly of benefit to our clients if they’re looking to sell.”

Kerstin Fehre, Professor of strategy for Vlerick, which is one of the top-ranked business schools in Europe, said: “The aim of the report is to guide readers through the cross-border mid-market M&A landscape. Seeing that the market was not hit more severely by the pandemic than the wider M&A market, and that it follows macro-economic trends, shows us that it is a healthy and growing niche in the international acquisition market, and therefore deserves more attention and specialization.”

Philippe Craninx concludes: “By analyzing over 40,000 deals, we found a segment that generally exists in the shadows, yet needs specialist expertise to thrive. Cross-border mid-market deal flow is a healthy segment of the market, and its performance can tell us much that benefits both acquirer and target, as each plan continues re

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