5 Reasons Why Expansion Through M&A is on the Rise in the US in 2017

An increasing number of German companies are planning their market entry or expansion into the US through Mergers & Acquisitions (M&A) transactions. This is not only confirmed through published transactions but was one of the results of the 2017 German American Business Outlook. One out of six respondents intend to realize an M&A project in 2017 - a 50% increase compared to the previous year. A heightened interest in and fulfillment of M&A transactions are particularly noticeable in the following industries: automotive, chemicals, pharmaceutical, manufacturing as well as print and packaging.

Here are five reasons why the US will continue to be the most attractive country for Mergers & Acquisitions for German companies in 2017:

1.     Growth prospects that counteract downturns in other markets

The US is the largest economy in the world. Therefore the US is a very attractive secondary market for German businesses that have reached their growth potential at home. Proximity to potential customers is key for German companies, so expansion into the US remains a key strategic initiative for growth.

2.     Attractive business climate

A driving incentive for the increase in Mergers & Acquisitions activities are the continuous discussions about low corporate taxes, as well as the currently low interest rates. Medium-sized companies in particular can benefit from the current conditions.

3.     Extension of existing product ranges

Through M&A transactions, German companies can extend their product ranges without extensive investment in Research & Development. At the same time, new business divisions can be developed using already established business structures.

4.     Higher margins

Depending on the industry sector, the US and German markets feature different price levels. Therefore, European companies with a local branch can leverage their US-experience in a price sensitive market and exploit their full market potential. As a result, companies – depending on the specific industry sector – can expect higher margins, be better positioned than their competition in a price competitive market, and therefore differentiate themselves from the competition.

5.     Demand from US companies

US companies with European operations are expressing great interest in utilizing their European suppliers in the US market. However, in most cases, this is only possible if local production and a local contact person are established in the US.

Advantages of an M&A transaction

An advantage of an M&A transaction is that mandatory licenses and the fulfillment market regulation requirements should already be in place and satisfied. Additionally, an M&A can bypass high industry specific market entry barriers. Furthermore, the company will have access to qualified personnel, an established customer base, technologies, and equipment, compared to a Greenfield project.

GACC Midwest can support your M&A project

GACC Midwest in Chicago and Detroit offers a comprehensive search of suitable companies. After the identification of a relevant target, we will contact these potential companies anonymously. The advantage of this is that the contacted companies have not yet actively started looking for an investor, which can lead to lower investment costs for the German company. With this process, the client will have a greater choice of qualified companies, which will better suit their acquisition criteria.

For further information, please do not hesitate to contact us.

Contact

Gerrit Ahlers

Director, Consulting & Corporate Development Services

Chicago

+1 (312) 585-8345
+1 (312) 644-0738
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