The US dollar has gained strength over the last few months. And the euro fell below parity with it in July. And the pound… well, let’s not get started.
For international organizations with dollar-denominated debts, conditions have become more expensive over the course of this year. Conversely, for US consumers, a stronger dollar will lead to lower prices on imported goods. And for US organizations with an eye on overseas expansion, their stronger currency has put them in a rather enviable position for M&A.
Favorable position for M&A
Thanks to this increase in purchasing power, cross-border M&A into Europe involving US bidders could swell.
Even in the context of broader macroeconomic disquiet and a less lively M&A market than 2021, now may be the time for US acquirers to go bargain-hunting in Europe.
Even the highest-quality targets in Europe and the UK often carry less heady valuations than their US equivalents, and the strong dollar should make these opportunities even more appetizing.
Forecast is bright
These currency swings won’t translate into swollen cross-border deal volumes immediately, and there are other considerations that executives must factor into their cross-border dealmaking equations, like the war in Ukraine and political volatility in the UK. But the forecast is rather bright.
Through the first six months of this year, 612 companies in Western Europe were targeted by US bidders, not very far behind the 658 such deals announced in H1 of 2021. The last couple of months of 2022 and the start of next year could see US bidders leave a similarly sizable dent in European deal markets.
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