The volume of acquisitions of US companies by their European rivals has reached a peak not seen since 2001, as chief executives gain confidence and set their sights overseas, bankers said on Friday. According to financial data provider Dealogic, so far this year European companies have paid out $47.2 billion to snap up 262 of their counterparts in the United States.
The last time Europe's chiefs were that acquisitive across the Atlantic was 2001, when they poured a cumulative $49.5 billion into 381 deals over the same period.
"CEO confidence levels are up, the markets are stronger, financing costs are lower, and more importantly the market now views cross-border deals positively," said Andrea Orcel, Merrill Lynch's Co-Head of Global Markets and Investment Banking for Europe, the Middle East and Africa.
"As a result and given the levels of growth in the domestic markets, companies move abroad," he said.
This week Germany's sporting goods maker Adidas-Salomon splashed out $3.8 billion to buy US rival Reebok.
Britain's HSBC Holdings Plc, said its HSBC Finance Corp, agreed to buy Metris Cos. Inc for $1.59 billion to expand in the rapidly consolidating US credit card industry.
And British defence technology company QinetiQ snapped up US firm Apogen Technologies Inc, for $288 million. That deal came after the UK's biggest defence firm BAE Systems earlier this year bought US armoured vehicle maker United Defence Industries Inc for $4.2 billion.
The new-found confidence comes after several years of balance sheet restructuring after costly expansions during the dot-com boom of the late 1990's. But now, with most of their debt pile reduced, European CEOs are looking for growth.
"The US is still one of the most attractive markets in the world. If you want to expand and be global you have to be in the US And that goes across most industries," said Henrik Aslaksen Deutsche Bank's head of M&A for continental Europe, adding that his clients were increasingly eyeing the United States for deals.
That's particularly true in the consumer industry where European companies, like Adidas, are anxious to tap into the world's biggest retail market, bankers said.
Surprisingly, exchange rates are not seen as a big driving force for transatlantic M&A, bankers said, noting the recent weakening of the British pound relative to the US dollar which, if anything, would make European firms more reticent.
"I don't think it's driven by currency. That's always the argument but companies aren't buying the dollar assets, they're buying the dollar earnings," one banker said.
One important aspect driving cross-border M&A is that markets are finally receptive to deals, bankers said. Before, if companies even contemplated mergers, it was enough to drive their stock price down. But when Adidas announced its acquisition of Reebok earlier this week, its stock price rose 5.7 percent.
Likewise, shares in Italian bank Unicredito rose after it said it would buy Germany's HVB for 20 billion euros, one of Europe's biggest deals this year.
And France Telecom's stock jumped when it agreed to acquire Amena, the wireless business of Spain's Auna, for 6.4 billion euros.
"It proves that the market is underwriting these deals," said one senior banker in Europe who declined to be named.
The positive reaction could help to create a domino effect of deals, bankers say, as CEOs see big acquisitions, both in Europe and in the United States, going unpunished.