Clean-energy deal seals fate for cross-border M&A

Industry:    2022-11-10

A strong dollar may tempt U.S. companies to shop abroad, but a deal unveiled on Wednesday will take any remaining steam out of such notions. The war in Ukraine, inflation and other factors already have hit cross-border M&A. Georgia-based Chart Industries losing 20% of its market value after saying it would pay $4.4 billion to buy Scottish rival Howden to bulk up in clean-energy equipment manufacturing should give any globetrotting-minded chief executive pause.

Roughly $1 trillion of cross-border deals have been announced this year, a nearly 40% drop from a year earlier, per Refinitiv. It’s steeper than the overall decline in merger volume.

Overseas expansion adds layers of difficulty to any transaction. In addition to currency fluctuations, it’s hard to manage a bigger enterprise with the additional cultural and possibly governmental complications thrown into the mix.

Such risks probably help explain why Chart lost $2 billion in market capitalization, despite $250 million a year of promised cost savings. The company was trading at more than 30 times expected earnings over the next 12 months, about three times peers’, and the acquisition will add to its debt pile, leaving little room for missteps. Any lingering cross-border animal spirits may be heading into hibernation.

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