KPMG’s latest Emerging Markets International Acquisition Tracker (EMIAT) which monitors deals from 12 developed economies and 11 emerging, high growth economies, shows that trade buyers in emerging economies are already back on the cross-border acquisition trail yet the number of deals instigated by trade buyers in the developed economies is still in decline.
The number of Emerging-to-Developed (E2D) deals registered in the second half of 2009 at 102, represents a strong bounce back from the 78 recorded in the first half of 2009. By contrast, the number of Developed-to-Emerging (D2E) deals fell to 216; making it four consecutive six month periods during which that figure has fallen.
Tony McNaught, Corporate Finance Partner, KPMG says, “These findings suggest that emerging economies have rebounded more quickly from the recession and this is an opportunity for New Zealand and Australian businesses to engage in strategic discussions with foreign companies operating in growth markets.
“The results are not surprising given the continuing problems in developed economies and probably represents a broader shift in cross-border M&A activity for years to come. We are starting to see this in our business, and have recently been involved with a successful assignment where KPMG worked with an investor from an emerging high growth Asian economy.”
The KPMG report shows that E2D deals now represent 47 percent of the D2E total – the closest the two sets of numbers have ever been since the EMIAT began in 2003. It also outlines that D2E deal activity has now more than halved from its high point of 463 deals in the latter half of 2007.
“These figures support recent expert comments about how the competitive threat posed by emerging high growth economies has been accelerated by the recession. The emerging economies – and the trade buyers within – have emerged quicker and more strongly from the problems arising from the recession. One notable trend over the last three years has been the significant increase in the number of Australasian and Canadian businesses being targeted by Asian investors.
“It’s apparent that emerging economy investors are becoming increasingly more sophisticated, buying assets that are strategically important to the development of their own industries and markets.”
Specific highlights from the KPMG report are:
· Emerging economies in Asia (notably China, India and Korea) have increased the number of developed country acquisitions by approximately 60% from 2004-2006 to 2007-2009. This has been led by central initiatives, particularly in Korea where outbound investment is being encouraged.
· For emerging economies the US is still the most popular destination with 345 inbound deals since 2003, compared to 259 for the UK and Germany on 116. Comparatively Australia has 106 deals of which 70% have completed in the last two years. Highlighting the Asian appetite for outbound investment, the percentage of Australian deals where China, India or Korea were the acquirer has increased from 20% in 2004-2006 to 47% in 2007-2009.
· Australia and Canada are the two countries where the gap between D2E and E2D deal volumes is at its narrowest. The number of E2D deals into Australia stands at 76% of its D2E total. For Canada, that figure is 57%.
· Since EMIAT began in 2003, the most acquisitive developed nation of emerging economy deals has been the US (1,549 deals) followed by the UK (823 deals). The US focus has predominantly been China and India (433 and 342 deals respectively) whereas the UK’s focus has followed geographic lines with more deals completed in Central and Eastern Europe and Russia (180 and 171 deals respectively). Since 2003, Australia’s trade investment in developing economies has been primarily in China and South Africa (29 deals each) followed by India (14 deals).
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For more information, or for an interview, please contact Sneha Paul on 09 363 3590 or 021 243 8997
Notes to Editors: KPMG is a global network of professional firms providing Audit, Tax and Advisory services. We operate in 144 countries and have 140,000 people working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.
About the EMIAT: The research analyzed deal flows between 12 selected developed economies – the U.K., U.S., Canada, Spain, France, Germany, Netherlands, Italy, Australia, Israel, Hong Kong and Japan – and 11 selected emerging economies or regions, comprising India, China, Russia, Brazil, South Korea, Vietnam, Macau, South Africa, Nigeria, the Middle East and Central & Eastern Europe.
Only those transactions classed as “completed” between July 2003 and December 2009 – and which saw a trade buyer taking at least a 10 percent shareholding in an overseas company - were included. Deals which involved backing by a private equity firm or other financial institution were not included.
The data was provided by Zephyr – a Bureau van Dijk Electronic Publishing product.
ZEPHYR is an information solution containing M&A, IPO and venture capital deals with links to detailed financial company information. It is the combination of M&A data provided by Zephus, and software from Bureau van Dijk Electronic Publishing (BvDEP). Links to complementary company financials and peer reports from BvDEP's product range are integrated for company valuation and benchmarking.
All new deal records are checked by a senior researcher before they are published. Wherever possible all deals are verified against a primary source. Any modifications or updates to existing deals are also checked prior to re-publishing. ZEPHYR contains information on approaching 650,000 deals with approximately over 75,000 additional deals added each year depending on levels of deal activity. Various deal types are covered on ZEPHYR including: M&A activity, IPOs, joint ventures and private equity deals. No minimum deal value is applied; ZEPHYR is an all-inclusive database of all deal sizes. www.zephyrdealdata.com