Unholy Alliance?

Activist investors, private equity drive M&A surge in Europe

Working in tandem. Source: Reuters

Well-heeled US and British investors are bringing a one-two punch to Europe that will spur mergers and acquisitions in Germany even as they seem headed to a new record globally next year. A combination of activist investors pressuring companies to streamline and private equity investors who want to snap up the ballast they throw off is driving the upsurge.

Poster child for the trend was the move by Daniel Loeb’s Third Point hedge fund to take a 1.3 percent stake in food giant Nestlé earlier this year. This prompted Ulf Schneider, CEO of the Swiss behemoth, to jettison less profitable operations as quickly as he could. Private equity firm Fireman Capital Partners was standing by to take stakes in two tea brands, Sweet Leaf Tea and Tradewinds, when Nestlé sold them.

The activist investors want higher share prices and the private equity firms want investments they can turn around for a profit in three to five years, so what looks at first like an unholy alliance is actually a match made in heaven. “We should see more and more interaction between activists and financial investors,” said Christoph Seidel, who heads up M&A activities for JPMorgan in Germany and Austria.

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