gas sectors are expected to use their cash reserves to consolidate their industries and buy undervalued companies overseas.
“It’s going to be bargain hunting,” predicted Bill McDermott, CEO of software group SAP.
Some US firms could also seek to benefit from a loophole allowing them to redomicile in Europe and use their overseas cash without having to pay US taxes.
Fears over retaliation from US Congress have killed some of these so-called “tax inversion” deals last year, such as Abbvie’s’s $55 billion bid for London-listed rare diseases drugmaker Shire.
But tax-driven deals could still happen in industries that do not depend on government spending, business leaders believe. In Europe, meanwhile, there will be a division between struggling companies looking at deals as a way to cut costs and stronger ones paying up to tap faster-growing markets abroad.
According to credit rating agency Moody’s, companies in the Europe, Middle East and Africa (EMEA) region had built up a combined cash pile of $1.06 trillion in 2014.
Martin Sorrell, CEO of advertising group WPP, said the European Central Bank’s decision to launch a so-called quantitative easing (QE) policy to kick-start euro zone growth could encourage companies to loosen their purse strings.
“QE will boost short-term returns and help people focus on the long term and invest,” he said. One space to watch in particular this year could be the chemicals industry.
“Our industry is very capital-intensive,” said Tony Will, CEO of US group CF Industries, which last year came close to merging with Norwegian fertiliser rival Yara in a deal partly motivated by tax advantages.
“Scale and cost-base do matter a lot. So if you can lower your tax bill through a deal that creates value for shareholders, there is a very compelling case to pull the trigger.”
Monsanto, the world’s largest seeds company, could also see an opportunity to revive its attempt to snap up Swiss rival Syngenta after the Swiss central bank’s decision to lift its cap on the franc hit local stocks. That move was in part motivated by tax benefits too.
Syngenta shares are down 10.5 percent this year, though a surge in the franc could offset this for a foreign bidder.
Analysts are expecting other deals in the sector as players such as Monsanto, Bayer and BASF look to broaden their reach in crop protection and seeds.
Canada’s Agrium could also see some action “one way or another”, said Will, after activist hedge fund Value Act bought a 5.7 percent stake in the company last October.