Mergers and acquisitions (M&As) are taking place at a record pace in Greece this year, a phenomenon not seen in several decades. Just this year, the M&As already implemented, or at the planning stage, are worth 5.7 billion euros and, according to a PriceWaterhouseCoopers study, many more deals lie ahead, beginning with the interest shown by four big foreign funds for several Greek firms, each with a capitalization exceeding 300 million euros. The big M&A deals so far this year have involved French bank Credit Agricole buying Emporiki Bank, National Bank investing in Turkey’s Finansbank, with a future option to buy all of its shares, mobile phone service provider Cosmote’s acquisition of electronics retailer Germanos, UK firm PC partners’ acquisition of casino and hotel operator Hyatt and Dubai Investments buying Marfin Group. It looks as if this year will overshadow last year’s record performance, when M&As worth 4.32 billion euros were made, up 114 percent on 2004 (2.02 billion). Most of last year’s deals involved technology and telecommunications (2.12 billion euros), banks and other financial services firms (863 million euros) and foods and beverages (664 million euros). Incentives The main incentives for M&As are, first, the economies of scale that can be achieved with the lowering of production costs and, second, the expansion into new markets and new sectors. Also important is the access gained into new lines of production through the acquisition of smaller but highly innovative firms. According to Emilios Yiannopoulos, head of the financial services department at PriceWaterhouseCoopers, the recent explosion in M&As has been made possible by the opening of markets through privatizations, the increased transparency achieved by the application of the International Financial Reporting Standards (IFRS) and the improvement of the country’s fiscal position through the decline of the public debt and the budget deficit. He also points out to Greek firms’ strategy of expansion into the Balkans (Bulgaria, Romania, Serbia and The Former Yugoslav Republic of Macedonia), Eastern Europe (Poland and Ukraine) and in other neighboring countries (Turkey, Egypt), the graduate reduction in corporate taxes and the harmonization of Greece’s capital markets laws with those of other European countries as factors encouraging M&As. The international economic situation also favors M&As. The low long-term rates and the abundance of capital available for investment are the main factors. But there are also several others, according to Jack Ribeiro, head of financial services at Deloitte and Touche. He says that the idea of cross-border deals has matured and that many European entrepreneurs have shed their traditional xenophobia. Beyond Europe, the emergence of a middle class India and China and the gradual retirement of the post-war generation in Europe, North America and Japan, have also helped M&As. Ribeiro predicts that, over the next three or four years, more than 700 banks will cease to exist because of cross-border M&As. To sum up, the factors facilitating M&As internationally are the following: – Low interest rates and high liquidity have made M&As an attractive prospect. Despite the recent rise in short-term rates, long-term rates are still relatively low. – The huge sums of capital at the disposal of investors such as private and state pension funds, insurance companies and mutual funds. Private equity funds have become especially active. In 2005, about $250 billion was accumulated for investments, putting the total sum available, including borrowed capital, at over $1 trillion. – Europe’s cross-border deals. Until recently, consolidation had been taking at country level, with only sporadic, and often failed, cross-border deals. European public opinion is ready to accept cross-border deals. Among the twelve recent large deals in Europe, eight have been cross-border. European enterprises must gain in size to satisfy investors looking for high returns and this growth can no longer be achieved at country level. – China and India are the new most promising markets. Their sheer size will result in huge demand for products and services. – The aging of the population, in general, and the big «baby boom generation» in particular. Their interest now turns from accumulating savings into managing these savings and, more importantly, spending them There has been an increased interest on the part of foreign investors in buying Greek companies. According to PriceWaterhouseCoopers experts, the main reasons for this are the following. Greece has inevitably become part of this global market. Foreign investors’ interest in Greece is also growing. The economic reforms of the past few years have made the Greek market more attractive. Legislation providing incentives for investors and the gradual reduction of the main corporate tax to 25 percent will also help, although Greece cannot hope to compete with low-tax countries such as Bulgaria, Cyprus, Ireland and Slovakia. However, Greece’s fiscal improvement and the expected upgrade of its credit rating will make capital available more cheaply and will, consequently, boost investment and, hence, M&As. While foreign investors have been increasingly present in the stock market, it is not only through them that we expect investment. Significant domestic capital also exists and Greek enterprises are increasingly looking abroad to expand. The shipping sector also has enough accumulated capital to branch out into non-shipping activities.