(Bloomberg) -- Carrefour SA beat out telecom and media companies to top the list of mergers and acquisitions targets in Europe, as dealmaking starts to recover from its worst quarter since summer 2020.

The French grocer was a clear M&A favorite in a Bloomberg News survey of 20 traders, fund managers and analysts in Europe at the end of March. While approaches by Canada’s Alimentation Couche-Tard Inc. and domestic rival Auchan fell apart early last year, the latter is said to weigh another takeover attempt. Any deal in France will look to avoid the presidential elections this month.

Worries about the war in Ukraine and soaring inflation dented confidence this year, with European M&A volume down 41% compared to a blockbuster first quarter in 2021. Yet, dealmaking is still happening at a historically elevated pace in Europe, as cheaper valuations and a rotation away from frothy growth assets provide an array of buying opportunities. 

“The M&A market has remained active even after the invasion of Ukraine and there is no shortage of potential buyers screening businesses,” said Stuart Ord, head of M&A at Numis Plc. He expects interest in financial services, technology, media and telecom and health-care sectors to continue.

Satellite company Eutelsat Communications SA, which topped the poll in January, came in second place this time. The firm rejected the advances of billionaire and media tycoon Patrick Drahi last year, but survey participants see potential for more interest in the French business. Telecom carrier Royal KPN NV, a frequent flyer in Bloomberg M&A surveys, also ended up high in the rankings.

Europe’s media sector is in focus as former Italian Prime Minister Silvio Berlusconi’s broadcaster, MFE-MediaForEurope NV, moved to take full control of a Spanish unit, likely the first step in its plan to create a pan-European television group. ProSiebenSat.1 Media SE is seen as next on the shopping list.

Bargain Hunters

Another area where dealmaking is picking up is private equity. Over the past two weeks, Pearson Plc, Ted Baker Plc and HomeServe Plc have all been targeted by financial sponsors after a slump in their share prices.

So far, the overtures haven’t met with much success, with both Pearson and Ted Baker saying the proposed offers were too low. The interest prompted Ted Baker to kickstart a formal sale process in search of higher bids this week. Private equity firms are likely to ramp up their buying spree to put cash piles to work before they are eroded by inflation.

“We are already seeing evidence of private equity firms re-entering the M&A market after a very quiet first quarter,” said Graham Simpson, analyst at Canaccord Genuity’s research division Quest. “This tells us they have their confidence back and the current valuations are too good to pass up.”

The focus in 2022 has shifted from mega-mergers to cost-cutting and unlocking value for shareholders as activist investors boost their presence in European companies. Several large U.K. conglomerates in particular have been caught in their crosshairs.

GlaxoSmithKline Plc is preparing to split out its consumer health business this summer, as Elliott Investment Management dials up the heat on management to improve returns. Activist investor Nelson Peltz is putting pressure on ailing consumer goods giant Unilever Plc, after abandoning its pursuit of Glaxo’s unit.

“The U.K. market is cheap relative to most other equity markets across sectors and on almost every metric, so activists are seeing there’s significant money to be made,” said Andrew Millington, head of U.K. equities at abrdn. The FTSE 100 Index trades at 11 times estimated earnings, compared with 13 times for the Euro Stoxx 50.

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