Germany may continue to be the backdrop for cross-border dealmakers over the next several months. Lately, strategic buyers from Europe's largest economy have been using M&A as a means to bolster their businesses and U.S.-based companies are the likeliest targets. For proof, consider the recent sales of Houston-based Dresser-Rand (NYSE: DRC) and Missouri-based Sigma-Aldrich Corp. (Nasdaq: SIAL).
When Muenchen-based Siemens AG (OTCPK: SIEGY) confirmed that it agreed to buy oil-drilling equipment firm Dresser-Rand for $7.6 billion, an even bigger Germany-U.S. deal would be announced the following day. On Sept 22, drugmaker Merck KGaA said it will buy St. Louis -based Sigma-Aldrich, a supplier of chemicals to the life-science industry, for $17 billion. Both deals are in cash.
Those two blockbuster deals were the latest in what was already a hustling month for U.S.-focused acquisitions by German companies. On Sept. 18, software maker SAP (NYSE: SAP) agreed to pay $7.4 billion deal for Bellevue, Washington-based cloud software company Concur Technologies (Nasdaq: CNQR). A few days prior, auto-parts maker TRW Automotive Holdings Corp. (NYSE: TRW) of Livonia, Michigan, was purchased by ZF Friedrichshafen for $11.74 billion.
According to Thomson Reuters, 2014 was just plain busy. Earlier this year, Leverkusen-based Bayer AG (OTCPK: BAYRY) inked a $14.2 billion deal for the consumer business of Merck & Co. (NYSE: MRK), based in Whitehouse Station, New Jersey.
Altogether, there were close to $33 billion in total deal value of German acquisitions announced in the U.S. so far in 2014. The 2014 tally surpasses previous years by a lot. In fact, German companies actually shelled out more cash in 2014 than in almost every year over the past two decades, except in 2000 ($42.5 billion) and 1998 ($56 billion).
"Is it just coincidence? Not really," says Robert Profusek, global head of M&A at law firm Jones Day. "The U.S. and German economies are similar, they're both leading in their regions and they're both big in technology and manufacturing businesses, which is what these recent deals have been about."
Several other factors are fueling the flurry of German-led transactions. Both countries have highly developed capital markets, deleveraged balance sheets and almost unlimited financing available.
Growing cash coffers at thriving German companies and sluggishness across the rest of Europe should ensure that the trend continues, Profusek says, adding, "Germany is the healthy part of the European Union."