AMD Buys Silo AI as M&A Sentiment Improves in Europe
European M&A increase 23% in 1H to $255 billion
Advanced Micro Devices (NASDAQ: AMD) bought Finland’s Silo AI in an all-cash transaction as part of a broader improvement in merger and acquisition (M&A) sentiment in Europe and the telecommunication, media, and technology (TMT) sector worldwide.
European M&A in the first half of 2024 totaled $255 billion, a 23% rise from the first six months last year, though lower than the $484 billion in same 2022 period, BCG said in a July 9 report. M&A sentiment “is highest” in Europe and in the energy, materials, technology, media, and telecommunications sectors, the Boston-based management consultancy said.
“As Europe’s economies recover and confidence in markets rises on the back of expected further interest rate decreases, we are now starting to see tempered optimism take a firmer hold,” Benoit Gérard, EY’s Europe, the Middle East, India and Africa financial services strategy and transactions leader, said in a July 8 report.
First-Half 2024 M&A Activity by Region and Sector
Divergent interest rate policies between the European Central Bank (ECB) and the Federal Reserve Bank could benefit the dealmaking environment in Europe. The ECB lowered its key interest rate by 25 percentage points in June, a cut that could support European financial, industrial, and utility sectors, while the Fed kept its rate unchanged.
Globally, technology M&As drove a 39% increase in M&A activity in the TMT sector, compared to the six-month period last year, BCG said.
Swisscom’s acquisition of Vodafone Italia for €8 billion, which the Italian government approved in May, was the biggest telecoms deal in Europe this year. The Orange-Masmovil €6 billion merger, approved by the European Commission, was the second.
Global Technology, media and telecommunications deal volumes, 2019-H1'24
AI May Fuel Global M&As
The adoption of Artificial Intelligence is expected to increase deal transactions globally, ranging from traditional M&A to partnerships, alliances, and other innovative relationships that have “not previously” been seen, according to PWC.
The $665 million AMD purchase of Silo AI, while significantly smaller than Vodafone and Orange-Masmovil deals, represents what PCW partners Barry Jaber and Bart Spiegel described in their June 25 report as “ continued optimism” about dealmaking in the global TMT sector this year.
The positive indicators, with the advances in generative AI and other new technologies, increased certainty around interest rates, record capital to invest and pent-up demand for dealmaking, “still hold true,” they wrote. “In the first six months of 2024, there have been some early signs that IPOs and technology megadeals are making a return.”
For AMD, the deal to buy Europe’s largest private AI lab was “another significant step in the company’s strategy to deliver end-to-end AI solutions based on open standards and in strong partnership with the global AI ecosystem,” AMD said on July 10.
“Across every industry, enterprises are looking for fast and effective ways to develop and deploy AI solutions for their unique business needs,” Vamsi Boppana, senior vice president of the Artificial Intelligence Group at AMD, said in its press statement.
Uncertain Environment
Even with this positive outlook, dealmakers may confront uncertain Europe.
France took an unexpected turn after a far-left alliance won the second round of snap elections on July 7, an outcome that may lead to domestic political uncertainty as different parties struggle to form a national government.
German Chancellor Olaf Scholz, whose coalition only won 31% of the European Union election last month, will likely be distracted by internal politics. British Prime Minister Keir Starmer will have to focus on winning public approval after only 60% of eligible voters participated in the July 4 election.
“Dealmakers and markets tend to be wary of elections because of the uncertainty they create about policy direction,” PWC’s Brian Levy, Global Deals Industries Leader, Partner, wrote in a June 25 report.
Geopolitics could also weigh on dealmaking sentiment, with no “easy or quick resolutions to the war in Ukraine or the conflict in the Middle East,” Levy said. “The United States–China relationship also continues to weigh on markets, not least in a US election year. All of this contributes to the uncertain geopolitical climate.”