Merger spending at record levels in first half

Spending on international mergers and acquisitions in the first half of this year has reached record levels thanks to accelerating European consolidation, according to research released yesterday by accounting, tax and consulting firm KPMG.

The data shows spending on cross-border mergers increased by 60 per cent to an all-time high of $643 billion (€690 billion) in the first six months of 2000, which is based on a new benchmark of 3,310 announced deals during the period. The research also revealed that European purchasers have concentrated on deals closer to home in the first half of 2000 than in 1999, when European companies spent unprecedented amounts on US targets. Cross-border merger spending within Europe reached $352 billion, more than triple the $102 billion from the same period a year ago.

European expansion and consolidation in industries such as telecoms and financial services drove this spending pace, said KPMG. It is not thought that persistent choppiness in the global capital markets, rising interest rates, or growing regulatory scrutiny dampened the enthusiasm of purchasers for targeting companies abroad.

Mr Gerard Flood, corporate finance partner at KPMG, said more intense global competition has put pressure on purchasers to act more quickly and more boldly than before. "We've seen it with the traditionally active players; now it's a global phenomenon. The next challenge will be to integrate these huge combinations well enough to harvest shareholder value," said Mr Flood.

An increase in the number of deals worth more than $1 billion each also contributed to the rise in international merger/acquisition spending, said KPMG. There were 99 such deals in the first half of 2000, compared with 55 during the same period in 1999.

It was revealed that 23 countries each totalled $1 billion of international merger spending in the first half, compared with only 18 countries in last year's first-half.

"These larger deals continue to transform key industries and confront firms on the sideline with difficult choices," said Mr Flood.

KPMG's research showed the countries most heavily targeted by international purchasers in the first half included Germany, the US, the UK, Canada, and France, which were also the countries whose firms were the most aggressive international spenders.