In an unpredictable macroeconomic environment, mergers and acquisitions are drying up. However, some markets remain more attractive to foreign investors than others. This is particularly true of France, where innovative companies continue to attract foreign capital. AURIS Finance, a consultancy specialising in mergers and acquisitions, explains why.
Where do French companies stand on the M&A market? In a study entitled “Evolution of the Franco-German M&A market in 2022”, consulting firm PwC reports 1,917 deals in France in 2022, compared to 3,155 in Germany over the same period. While the number of transactions in Germany remains stable, the number of transactions in France has fallen by 14% to its lowest level since 2013. However, in terms of value, Germany has also seen a sharp decline of 33% over the year. Intra-European transactions are also on the decline, as is the case for transactions between France and Germany, which fell by 22% in 2022.
Fewer mega-deals
This dip can be explained by the absence of cross-border mega-deals in 2022. In 2021, for example, major deals such as the Alstom/Bombardier Transportation deal and the €4bn acquisition of German group Birkenstock by French giant LVMH dominated the market. Despite this slowdown, French companies remain attractive to international investors. The share of transactions carried out on French soil by foreign investors will reach 44% in 2022, compared with 35% in 2021. An increase of 9 points, which “confirms the gradual revival of France’s attractiveness observed since 2018”, the consultancy PwC comments in its study. For their part, German companies remain very attractive, accounting for 64% of transactions by foreign investors in 2022.
Investors from English-speaking countries are in the lead
Who are these foreign investors taking over European companies? Investors from English-speaking countries lead the way in France and Germany. With 288 companies acquired in 2022, the United States is the leading investor in France, on a par with the United Kingdom (287 deals). The same is true in Germany: of the 3,155 deals completed in 2022, 599 involve a British party and 537 an American party. Intra-European deals remain in the minority. While Germany is the third largest investor in France, only 70 deals involving French targets were completed in 2022.
Focusing on profitability rather than hyper-growth
In an uncertain macroeconomic environment, French companies are resisting. This is particularly true of innovative companies and start-ups, which continue to attract international funding. Nevertheless, the scarcity of liquidity is making investors more cautious. Financiers are becoming more vigilant when it comes to fundraising and acquisitions. Instead of hypergrowth, they are now focusing on short and medium-term profitability. Only companies in a solid market environment are being considered.
Get the support you need
While French companies continue to attract foreign investors, these are becoming more vigilant. The due diligence process is becoming more and more rigorous, and all aspects of the target company are being scrutinised. Similarly, when raising funds, the profitability potential of the target company is carefully examined. AURIS Finance’s experts are specialised by sector. Whether you are an investor looking for a new opportunity or a company in the process of being sold, we will support you throughout your transaction.
