Mergers and acquisitions (M&A) are undergoing a challenging phase, impacted by economic conditions, shifting regulations, and industry-specific trends. We asked a few questions about the state of M&A in Luxembourg and its tech sector to Fabian Beullekens, the head of Allen & Overy Luxembourg’s Corporate and M&A practice who recently hosted the firm’s second M&A Forum.
In this interview, Mr. Beullekens provides valuable perspectives on the current M&A landscape, along with a focus on the tech sector.
Navigating the M&A Landscape
Discussing the M&A market, Mr. Beullekens explained, “Globally, the past 18 months have been quite challenging. We’ve witnessed a significant slowdown with a material drop in deals worldwide. The value of M&A deals announced in the first nine months of the year was the lowest since 2013. This slowdown obviously also affects Luxembourg”. He also shared that there’s a sense of caution among industry players, and some market participants present at the M&A Forum even used the motto “survive until 2025”, considering that 2024 will continue to be challenging. However, he is optimistic about Luxembourg, which has shown resilience, with notable activity in the regulated space, particularly in banks and insurance companies. The tech sector has also seen some deal highlights.
M&A Trends in the Tech Sector
Mr. Beullekens highlighted two key trends impacting M&A, particularly within the tech sector. The first trend is the influence of high interest rates, which have created a credit crunch. Private equity investors, who often play a major role in M&A, have seen credit availability (which is key to their business model) reduced, mechanically leading to decreased M&A activity.
The second trend is the increasingly aggressive stance of antitrust regulators in various regions, including the United States, the European Union, and the UK. This approach has led to a significant increase of enforcement proceedings and as a result to increased deal uncertainty.
Evolving Regulations and Economic Factors
Discussing regulatory changes, Mr. Beullekens mentioned an upcoming regulatory change, “Historically, Luxembourg was the only Member State in the EU without a merger control regime, but a pending bill in parliament is set to introduce one. This change is likely to have an impact on timing and process of M&A transactions once the law is adopted, affecting both buyers and sellers.”
Forecasts for the Luxembourg M&A Market in 2024
As for the future, Mr. Beullekens expressed optimism about the Luxembourg M&A market: “In 2024, we anticipate some decent levels of activity in regulated industries (banks, insurance companies) and in the tech sector (and fintech in particular). The tech sector is typically strong and buoyant. When it comes to Luxembourg but also globally, it’s where the entrepreneurs are. Entrepreneurs have projects, they are full of ideas, they’re impatient and you can’t slow down entrepreneurship! It’s a mindset which drives development and therefore funding and M&A activity.” Although it is hard to predict.
A Leading Role in M&A Transactions
In his role as the head of Allen & Overy’s Luxembourg Corporate and M&A practice, Mr. Beullekens and his team typically act as lead counsel on M&A transactions. He explained, “We aim to be in the driver seat (with our clients) when it comes to structuring and negotiating an M&A deal. This proactive and hands-on approach is probably a differentiator in Luxembourg.”
As Luxembourg adapts to evolving regulations and economic changes, it remains a dynamic hub for M&A activities, with ample opportunities in both regulated sectors and the thriving tech industry. “Allen & Overy’s proactive approach and knowledge of the market across sectors puts us in a unique position to guide clients through the shifting M&A landscape and help them achieve their strategic goals”, he concluded.