KPMG Study: U.S. Companies Lead Pack as Acquirers of Emerging Market Companies in First Half of 2011
NEW YORK, Oct. 17, 2011 /PRNewswire/ — U.S.-based companies led the way in completing merger-and-acquisition (M&A) deals with emerging and high-growth market companies in the first half of 2011, nearly doubling the number of acquisitions made by the second-ranked country, according to KPMG International’s latest Emerging Markets International Acquisition Tracker (EMIAT) study.
The KPMG study, which tracks completed deals in which an acquirer took at least a five percent shareholding interest, revealed that in the first half of 2011, U.S.-based companies completed 144 emerging and high-growth market acquisitions, up from 124 in the second half of 2010. Canadian companies made the second most acquisitions of emerging market companies with 82 in the first half of 2011.
In the first half of 2011, the most popular targets for U.S. companies were China (26), Brazil (25), Central America and Caribbean (21), India (18), other South American countries (16), and South and East Asia (16).
“U.S. corporate interest in emerging markets has continued to increase, as companies with strong balance sheets were prepared to pay for attractive opportunities,” said Mark Barnes, principal-in-charge of KPMG LLP’s U.S.-High Growth Markets practice. “The opposite investment flow, from emerging countries to the United States, also increased. U.S. businesses may be seen as the most appealing targets because of the strength of their brands, technology and intellectual capital in a market that is tested and proven.”
U.S. Companies Are Most Targeted by Emerging Market Countries
U.S. and Australian companies were the most popular investment targets for emerging and high-growth market companies, with 47 and 22 acquisitions made in each country in the first half of 2011, respectively. In the second half of 2010, there were 40 such acquisitions made in the United States. The South and East Asia category (14) and India (11) accounted for the majority of acquisitions made in the United States in the first half of 2011.
Overall, emerging and high-growth market companies made 220 acquisitions in developed economies in the first half of 2011, down from 237 during the second half of 2010, according to the KPMG study. South and East Asia was the top acquirer in emerging-to-developed deals (E2D) with 54 acquisitions in the first half of 2011, followed by India (38) and China (32).
“Uncertain economic conditions in many developed countries – particularly in the Eurozone – have slowed the volume of acquisitions made by emerging market companies,” said Barnes. “While the short-term outlook is unclear, we expect the continued rise of the major emerging markets to fuel more acquisitions in developed economies over time, as there are deals to be had at discounted prices.”
D2E Deals Remain Steady
According to the KPMG study, developed-to-emerging (D2E) deals increased slightly overall to 693 deals in the first half of 2011 versus 689 registered in the previous six-month period.
Following the United States (144) and Canada (82), the United Kingdom (62), Japan (61) and the other European countries category (61) made the most deals in emerging market economies.
The most popular emerging market targets for developed countries included South and East Asia (129), China (91), other South American countries (83), Brazil (69), and Central and Eastern Europe (67).
“Companies looking to expand into an emerging market often find that acquiring an established local company is a faster way to gain a foothold in a target emerging market,” said Dan Tiemann, U.S. lead partner for KPMG LLP’s Advisory Transactions and Restructuring group.
E2E Deals Fall
In the first half of 2011, there were 117 total emerging-to-emerging (E2E) deals, down from 144 in the previous six-month period. South and East Asia was the most popular target, registering 22 inbound deals, according to the KPMG study. Russia was the leading emerging market acquirer in other emerging markets with 22 deals.
Barnes noted, “The decrease in the number of acquisitions made by emerging market companies in other emerging markets is not surprising, given the fact that organic growth prospects are often so good within their home countries.”
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. The 15 developed countries or groups include the United Kingdom, the United States, Canada, Spain, France, Germany, the Netherlands, Italy, Australia, Singapore, Hong Kong, Japan, Europe (other), the Offshore Group and Oceania. The 13 emerging economies or groups include Brazil, Russia and Cyprus, India, China, Central & Eastern Europe, the Commonwealth of Independent States, Malaysia, South and East Asia, South Africa, Middle East & North Africa, sub-Saharan Africa, South America (excludes Brazil) and Central America & the Caribbean. Established in 2003, the EMIAT includes data from “completed” transactions where a trade buyer has taken minimum five percent shareholding 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.us.kpmg.com), is the U.S. member firm of KPMG International Cooperative (“KPMG International”). KPMG International’s member firms have 138,000 professionals, including more than 7,900 partners, in 150 countries.
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SOURCE KPMG LLP