DAVOS, Switzerland —The chief executives of some of Europe’s richest companies, gathered at this week’s World Economic Forum amid a flood of negative economic forecasts, have a message for doubters: Don’t count us out.
The heads of Nestle, Royal Dutch Shell and Vodafone are starting 2012 with the resources for dealmaking: strong cash piles, robust balance sheets and emerging-market operations that are blunting the impact of slowing profits at home. Roche Holding’s $5.7 billion hostile bid for Illumina this week shows European CEOs are already stepping up deals as the debt crisis lingers.
“What’s happening in the markets is not perfectly aligned with the confidence CEOs are expressing in doing deals because they’re armed with strong balance sheets and lots of cash,” said Pip McCrostie, who oversees Ernst & Young’s mergers and acquisitions practice as global vice chairwoman of transactions, and is attending the forum. “Europe has large corporations that are among the strongest and most diversified. The broader question for them will be whether there is a way to grow and use (mergers and acquisitions) to do that.”
The biggest European companies by market value have cash reserves of $1.54 billion on average, 23 percent more than in 2007, according to data compiled by Bloomberg. More than $100 billion in divestments by European companies last year helped the largest nonfinancial members of the Stoxx Europe 600 Index boost their average profit margin to 12.6 percent. Bloomberg News
