More European companies are shunning high-stakes deals in favor of smaller M&As
Flush with cash from a period of resilient earnings, a growing number of European companies are shunning high-stakes deals in favor of smaller and targeted “bolt-on” acquisitions to pursue growth. Executives from industrial giants to consumer goods firms are deploying capital on strategic deals designed to snap up competitors and acquire technologies instead of staking their reputations on major deals that run the risk of never materializing. It’s a strategy that is allowing firms to pursue growth without the immense risks and regulatory headaches that have scuttled larger deals. “This is a time again as part of playing offense, where we’re definitely considering what M & A might be on the table,” Hanneke Faber, CEO of Swiss-American hardware maker Logitech , told CNBC’s ” Squawk Box Europe ” after announcing its first-quarter results. The company sits on a $1.5 billion cash pile with no debt, with Faber adding that mergers and acquisitions are a key pillar of the company’s capital allocation policy. That sentiment is echoed across the continent. DWS Group , a German asset manager, described a similar posture of patient hunting. “We are in a position of strength. We have 800 million of excess capital and counting,” Markus Kobler, DWS’ chief financial officer, told CNBC in July. “We don’t feel pressurized that we have to do something… but we look at targets.” That approach stands in stark contrast to the high-stakes drama surrounding larger potential tie-ups. Bigger isn’t always better In the energy sector, Shell CEO Wael Sawan pushed back against the “bigger is better” logic driving consolidation among his U.S. rivals. “I don’t buy bigger is better. I think you have to drive it from a value perspective,” Sawan told CNBC, noting that the bar for any large deal is exceptionally high. A deal between BP and Shell , two of the U.K.’s largest oil and gas firms, would have likely attracted the attention of competition regulators. Instead, the company chose to do smaller transactions, such as the $510 million deal with France’s TotalEnergies to buy its stake in a Nigerian offshore oilfield earlier this year. Sawan said those are the type of deals that can help Shell “grow without having to do a big splash.” Sawan is not alone in rethinking large-scale M & As. In Italy, UniCredit CEO Andrea Orcel recently abandoned a bid for rival Banco BPM after the deal became a “drag,” with one too many political obstacles. “Given the situation on golden power, there was no other place to go, and at some point, you need to catch your losses, eliminate your drag, and focus on what you control,” Orcel told CNBC, referring to the Italian government’s power to block deals in strategic sectors. UniCredit is also engaged in a transaction involving the potential takeover of Germany’s Commerzbank , which is facing significant political pushback. Bolt-on strategies The uncertainty and increased risks around high-stakes deals have made bolt-on strategies more appealing for executives. French building materials giant Saint-Gobain has made them a core part of its business model. “Large, transformative acquisitions, that’s not really our play,” Maud Thuaudet, Saint-Gobain’s CFO, told CNBC earlier this month. “We are much more into being very selective, very value accretive in terms of how this complements country by country, our portfolio of customers and technologies.” The company announced that three such deals made in Canada, Peru and Italy were closed in a single week in July, on top of larger acquisitions in Australia and Latin America. For Swiss fragrance and flavor maker Givaudan , it’s about acquiring customer books and new capabilities. “This is really part of the strategy of Givaudan, which is around the bolt-on acquisitions, to buy small competitors, which give us a very nice and interesting portfolio of clients that we don’t necessarily have, and the two, combined with Givaudan, is a great way to grow,” said CEO Gilles Andrier. The company recently bought a makeup firm in Italy and a fragrance competitor in Brazil. Givaudan, which also operates a pet care division, said it is openly scouting for deals in the pet food space. “If there would be an asset in pet food, we’ll be happy to try to buy it,” Andrier added. Dutch grocer Ahold Delhaize , which has been the subject of rumors about a potential mega-merger with France’s Carrefour in late 2024, pointed instead to its recent 1.3 billion euro ($1.5 billion) acquisition of Romanian supermarket chain Profi as proof of its active M & A strategy. “We also look at other opportunities to grow the company inorganically through M & A, and that’s why we are always looking at what we can do in Europe and the US,” said chief executive Frans Muller. “We have an active view on that. We have a strong balance sheet where we have the strength to do these kinds of things.” “We’re actively looking and where things fit our strategy agenda and fit also, let’s say, the right economic values, we are open to these kinds of things,” Muller added. Executives are also keenly aware of the operational burdens that M & As can create in integrating the acquired business into their own firms, highlighting the attractiveness of smaller deals. German automotive and industrial supplier Schaeffler is still digesting its large acquisition of Vitesco Technologies, a deal that closed just last year. “We have our hands full with that integration,” said CEO Klaus Rosenfeld, admitting the company has little room for further M & A risk. “If you think about the complexity that has been triggered by that acquisition, we need to bring that further down,” Rosenfeld added. “We also have a leverage situation that is still okay, but there’s not much [room to maneuver]. So we are, at the moment, very cautious in looking at future acquisitions.” — CNBC’s Juliana Tatelbaum, Karen Tso, Steve Sedgwick, Silvia Amaro, Annette Weisbach, and Carolin Roth contributed to this report.
