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Growth in European Mergers and Acquisitions to Signal Recovery

Mergers and acquisitions in the European Community are expected to rise 20% over their 2009 levels.

Analysts are watching the takeover attempt of Cadbury by Kraft in the UK for $10.5 billion as a sign of events to come during 2010.

The last data coming from Mergermarket confirms the trend during the Q4 of 2009 toward acquisitions and mergers to grow market share, a key strategic wind shift from mergers of necessity related to the financial crisis to mergers of opportunity to achieve growth.

According to a survey published in December by Boston Consulting Group and UBS, roughly 20% of the managers surveyed indicated that they were planning a major merger operation for 2010. Merger activity is expected to be largest in the United States. More generally, analysts are expecting 2010 to mark the return to a more normal economic environment, using more traditional modes of financing and less risk.

For such consolidations and restructurings to occur, several factors need to be simultaneously present. First, there needs to be a realistic valuation of companies with an adequate balance of profits and reserves and the measure of taste for risk; a climate of confidence needs to return.

In this context, pharmaceutical companies or companies dealing in raw materials, or financial insitutions will be particularly active and an increasingly preponderant role will be played by companies operating in emerging economies.

Analysts also underline that financing of operations will rely on cash or exchange of stock, though the market expects several more months of cheap money during which time companies can finance their operations with cheap loans.

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