Emerging market M&A deal volume at record low in 2013: Survey

NEW YORK - Reuters

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Mergers and acquisitions activity among developed and emerging markets fell to a record low in 2013, dropping 17.3 percent versus the prior year due to still fragile economic growth and rising political unrest, a new survey has showed.

U.S. companies, while still chalking up the most purchases of emerging market assets, saw their M&A activity shrink last year with 220 deals completed versus 226 in 2012, according to audit, tax and business advisory services firm KPMG.

In its latest High Growth Markets Tracker study, the deal flow globally among developed and high-growth economies, or emerging economies, fell to 1,682 transactions last year versus 2,033 deals in 2012.

The second half of last year saw 810 deals completed, the fewest number of M&A deals involving emerging market companies, either as a target or a buyer, in any six-month period since KPMG started compiling the study in 2005, the data showed.

The number of deals completed by U.S. companies fell to 98 in the second half of last year versus 122 in the first six months of 2013, marking the fewest number of U.S.-led purchases in any six month period since the survey began.

“With economic growth slowing and political unrest in some emerging markets, companies in developed markets are shying away from cross-border acquisition targets,” Mark Barnes, national leader of KPMG’s U.S. High Growth Markets practice said in a statement.

“Although regions such as Central America and Europe present access to new consumer populations, and additional growth opportunities exist in other fast-growing emerging markets, investors are playing it safe by staying on the sidelines for now to avoid the risks associated with expanding their organizations’ global footprint,” he said.

Three broad categories of M&A activity were tracked by KPMG using Thomson Reuters data: developed market acquirer’s of emerging and high growth market assets and vice versa; and acquisitions of one emerging and high growth market company by a peer in another emerging and high growth market.

Globally, the study showed, emerging market companies increased their purchases of developed market assets by seven percent in the second half of last year with 190 deals completed versus 177 deals in the first six months of 2013.

However, on a full-year basis, acquisitions of developed market companies by emerging market firms fell 20 percent in 2013 versus 2012.

“U.S. companies remained the most popular targets for emerging and high-growth market companies with 36 acquisitions made in the United States in the second half of 2013, up from the 33 deals completed in the first half of 2013,” KPMG said.

The United States remained attractive to investors because of a perceived stability of the North American market and predictable growth in the region, Barnes noted.

Developed market firms targeted the emerging market regions of South and East Asia firms the most for acquisitions with 81 deals completed, followed closely by Central and Eastern Europe with 79 transactions done.

Russia remained the leading acquier of emerging market assets with 28 deals.
A deal was considered in the survey if an acquirer took at least a 5 percent shareholder interest.

However, deals that involved backing by government, private equity firms or other financial institutions were excluded.

The research analyzed deal flows between 15 developed economies or groups of economies and 13 high-growth economies or groups of economies.