The semi-annual KPMG study, which tracks completed deals in which an acquirer took at least a 5 percent shareholding interest, found that U.S.-based companies completed 108 emerging and high-growth market acquisitions in the first half of 2012, down from 160 in the first half of 2011.
This drop in acquisitions made by U.S. companies coincides with a worldwide slowdown in developed-to-high-growth market (D2H) deals, which dropped 15 percent -- 661 in the first half of 2012 versus 778 in the first half of 2011. Companies in the “other European countries” category made the second-most acquisitions of emerging market companies with 81 in the first half of 2012.
The most popular geographic targets for U.S. companies in 2012 were Brazil (25), Central America and the Caribbean (15), and South and East Asia (14). South and East Asia (122) and Brazil (81) were the most popular targets for D2H deals overall.
“The M&A slowdown is impacting mature and high-growth markets alike,” said Mark Barnes, principal-in-charge of KPMG LLP’s U.S. High-Growth Markets practice. “But there are pockets of bright spots, as we see China a leading buyer of companies in developed economies, Brazil a top destination for acquisitions by companies in developed economies, and U.S. companies still acquiring companies in high-growth markets although deal volume is down.”
U.S. Companies Still Most Popular Targets for Emerging Market Countries
U.S. companies were the most popular investment targets for emerging and high-growth market companies in the first half of 2012 with 47 acquisitions made in the country, more than doubling the number of deals made by companies in the other European countries category (23). South and East Asia (16), China (7), and Central America and the Caribbean (7) accounted for the majority of acquisitions made in the United States in the first half of 2012.
The United States also was the most targeted country in the second half of 2011 with 49 acquisitions made by emerging and high-growth market companies.
Overall, emerging and high-growth market companies made 203 acquisitions in developed economies in the first half of 2012, down from 219 during the first half of 2011, according to the KPMG study. South and East Asia (41) and China (39) were the top acquirers in high-growth-to-developed deals (H2D) in the first half of 2012.
“Potential U.S.-based acquirers are sitting on a lot of cash, which could cause a brighter second half, but, at this point, they are being very careful about how they deploy it,” said Dan Tiemann, partner and U.S. leader of KPMG’s Transactions and Restructuring practice.
H2H Deals Dropping the Most
In the first half of 2012, there were 115 total high-growth-to-high-growth (H2H) deals, down from 166 in the first half of 2011. Central and Eastern Europe was the most popular regional target, registering 21 inbound deals, according to the KPMG study. Russia was the leading emerging market acquirer in other emerging markets with 23 deals.
“While deals between companies in high-growth markets are down, these companies are still seeing opportunities in developed economies,” said Barnes. “In some cases, the Eurozone crisis and low asset values in the United States have encouraged countries which are not traditionally seen as acquirers, such as Indonesia and Thailand, to make deals.
“Due to uncertain economic conditions, some companies in developed economies are holding off on making acquisitions in high-growth markets,” added Barnes. “But we see pent-up demand as many of these high-growth markets are still attractive and have proved to be self-sustaining due to domestic consumption and growing middle class, which could signal an increase in acquisitions of high-growth market companies when economic conditions improve.”
About KPMG’s Emerging Markets International Acquisition Tracker Study
The study analyzed deal flows between 15 “developed” economies or groups of economies and 13 “emerging” and “high-growth” economies or groups of economies. Established in 2003, the EMIAT includes data from “completed” transactions where a trade buyer has taken a minimum 5 percent shareholding interest in an overseas company. All raw data within the EMIAT is sourced from Thomson Reuters SDC and excludes deals backed by government, private equity firms or other financial institutions.
About KPMG LLP’s U.S. High-Growth Market practice
The KPMG LLP U.S. High-Growth Markets practice provides audit, tax and advisory services to U.S.-based companies in their pursuit of outbound investment opportunities in high-growth and emerging markets such as China, India, Brazil, Russia, Mexico and Vietnam, and high-growth market-based companies with inbound investment interest in the United States.
About KPMG LLP
KPMG LLP, the audit, tax and advisory firm (www.kpmg.com/us), is the U.S. member firm of KPMG International Cooperative (“KPMG International”). KPMG International’s member firms have 145,000 people, including more than 8,000 partners, in 152 countries.