Deals are more often on the loose
Now that the European Central Bank has further reduced interest rates, it seems to be a good time for mergers and acquisitions. But nothing could be further from the truth, because concerns about economic developments prevail.
This is at least the conviction of Mike Nawas, associate professor of Financial Markets at Nyenrode Business University. He sees economic uncertainty increasing.
"From a European perspective, concerns about the economy come from the trade war, the increasing protectionism and the collapsing growth of Germany and other European countries," according to Mike Nawas, the main reasons for this uncertainty.
This makes the companies more aware of a possible downside that an acquisition can entail.
“Due diligence is being intensified and you can see that it generally takes longer to close deals. And more transactions fail. You also see that the selling parties can make fewer demands on the deal. Whereas a year ago there was a seller's market, nowadays there is more and more a buyer’s market where buyers can make more demands on the terms and conditions of the deal, ”says Professor Nawas.
On the other hand, the banks are still positive with regard to takeover financing.
“That's because the interest rate is so low. They are looking for riskier loans that can give them returns that they often can’t achieve with other, less risky loans, ”concludes Mike Nawas