JPMorgan Sees ‘Strong’ 2015 for German M&A Amid ActivismShane Strowmatt
German mergers and acquisitions will have “another strong year” in 2015, helped by an increase in spinoffs and shareholder activism, a senior JPMorgan Chase & Co. banker said.
“We’re coming from a very strong base and therefore it would be really ambitious to say we’ll see clearly more,” Dirk Albersmeier, head of German M&A at JPMorgan, told reporters in Frankfurt.
German M&A has surged more than 70 percent to $200 billion this year as German companies made acquisitions in the U.S. to benefit from faster economic growth, according to data compiled by Bloomberg. Those included Merck KGaA’s $17 billion takeover of Sigma-Aldrich Corp. and ZF Friedrichshafen AG’s purchase of TRW Automotive Holdings Corp. for $11.7 billion.
Several German companies also announced spinoffs this year, and this trend will probably increase in 2015, Albersmeier said. EON SE, Germany’s largest utility, announced last week it will break itself up, spinning off fossil-fuel power plants into a separate company to focus on renewable energy. Bayer AG plans to spin off its plastics unit, it said in September.
Shares in both companies surged on the announcements. Activist investors will increasingly buy stakes in German companies and pressure management for strategic changes, Albersmeier said. Investors can then benefit from what he called the “magic five percent” share increase when corporate actions such as spinoffs are announced.
“If the share price increases five percent during a spinoff, it’s a relatively good starting point for an activist,” he said.
Activist hedge fund Elliott Management Corp. in the past two years bought stakes in German cable operator Kabel Deutschland Holding AG, which is being acquired by Vodafone Group Plc, as well as Celesio AG, which was bought by McKesson Corp.
“The presence of activist shareholders in Germany is on the rise and we have to wait and see what the boardroom response to the challenges will be,” Christof Jaeckle, a German partner at law firm Hengeler Mueller, said at the briefing. He also said he is optimistic for M&A next year.
“There is a lot of confidence and liquidity in the market and if the economic and political environment remains stable, we expect the M&A market to remain rather bullish,” Jaeckle said.