NEW YORK, Aug 23: Mergers and acquisitions activity among developed and emerging markets fell in the first half of 2012 compared to the same period a year ago due primarily to Europe’s uncertain outlook, a new survey showed on Thursday.
The number of completed deals fell 15.8 percent in the first six months of the year versus the first six months of 2011, according to audit, tax and business advisory services firm KPMG.
In its latest Emerging Markets International Acquisition Tracker (EMIAT) study, the deal flow dropped to 979 from 1,163 and marked the lowest number of completions since the first half of 2009.
‘The Eurozone (credit) crisis has created a bleak view of the global economy generally, which is in itself causing a slowdown in M&A activity,’ Mark Barnes, leader of KPMG LLP’s U.S. High-Growth Markets practice told Reuters.
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.
Overall the deal volume between high growth emerging markets fell 30.72 percent year-over-year.
KMPG did say it sees pent-up demand for deals ahead in these emerging and high growth markets due to rising domestic consumption and a growing middle class.
U.S.-based companies completed the most deals for assets located in emerging and high growth markets, at 108. That represented a 33 percent drop from the prior period when the 160 closed deals represented the best first half since 2008.
‘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,’ KPMG said.
Brazil was the most popular target for U.S. Companies at 25 deals completed, followed by the Caribbean at 15 deals and South and East Asia at 14 deals.
The United States was the biggest acquirer but also the destination of choice by companies from emerging and high growth markets looking to make purchases.
The survey showed emerging and high growth market companies closed 47 deals for U.S. Assets in the first half of this year, down from 48 done in the year-ago period.
Germany represented the next largest number of completed deals in a single developed nation by emerging and high growth markets at 18. That was an increase of two deals over the first half of 2011.
Overall, emerging and high growth market companies made 203 acquisitions in developed economies in the first half of 2012, down from 219 in the year-ago period, the study said.
South and East Asia with 41 deals and China with 39 deals represented the top acquirers in high-growth-to-developed market (H2D) deals in the first six months of this year.
‘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,’ Dan Tiemann, leader of KPMG’s Transactions and Restructuring practice said in a statement.
Russia was the biggest buyer of other emerging market assets, but the 23 completed deals represented a 50 percent drop from the prior period.
A deal was considered in the survey if an acquirer took at least a 5 percent shareholder interest. However deals which 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.
(agencies)
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