The euro continued its six week decline this week falling to its lowest level in more than 11 years after the European Central Bank announced it would purchase $60 billion euros a month of debt. While the euro continues to decline against the United States (U.S.) dollar (USD), the USD is expected to see its largest weekly gain since June of 2013, on expectations that the U.S. economy will outperform the European economy.
What does this mean for U.S. mass notification software suppliers? IHS anticipates that the weakening euro will make acquisitions of European mass notification software suppliers more attractive in the short-term. U.S. mass notification software suppliers should use caution as the political and social climate in Europe continues to change.
First, the collection of European citizen’s data by the U.S. National Security Agency (NSA) has brought about strict data collection regulations by the European Union (EU). The EU’s new Data Protection Regulation seeks to regulate all companies that collect personal or personally identifiable information from residents of the EU, process data on servers in the EU, or maintain an office in the EU. While implementation of new data protection regulations may be delayed until 2016, the implications to U.S. suppliers could be significant once adopted.
Furthermore, there is a genuine concern, on the part of EU governments, unions, and citizens, that information collected by U.S. suppliers will be subjected to U.S., rather than EU privacy laws. IHS believes that this could result in a decline in post-acquisition revenues as governments and commercial end-users look to distance themselves from U.S. owned suppliers. This was evident during the 2014 Trade in Services Agreement talks where the U.S. government attempted to gain immunity for U.S. companies that were accused of data breaches or claims of negligence with data in the host country. If this recommendation is adopted it would force European governments to pursue legal action in U.S. courts rather than the host country.
Finally, while a weaker euro is expected to generate more interest in European acquisitions, U.S. mass notification software suppliers should remain cautious and avoid overly optimistic expectations of future growth based on the acquired supplier’s past performance. The European market is poised to undergo dramatic regulatory changes which could significantly increase the legal risks for the parent company and affect the willingness of European end-users to engage with U.S. owned mass notification software suppliers.