For the first time ever, China has beaten India to become the most active acquirer of developed economy assets according to KPMG's annual Emerging Markets International Acquisition Tracker (EMIAT).
The first half of 2009 saw a dramatic slowdown in the number of cross-border M&A deals involving emerging market companies buying assets in the developed economies.
According to KPMG's Emerging Markets International Acquisition Tracker (EMIAT), there were just 70 such deals in the first six months of the year; exactly 50 percent down on the latter half of 2008 - and the lowest six month total since the first half of 2005.
The collapse in Emerging-to-Developed (E2D) deals comes six months after a similar decline was seen in the number of Developed-to-Emerging (D2E) deals, which fell from 446 to 360. That decline continued in this latest period with deal totals falling back once more to 306.
The one bright spot within those numbers comes from China. While most of her emerging markets counterparts have struggled, China's deal activity has now remained remarkably constant since the beginning of 2007. Sixteen E2D deals in the past six months may not sound a lot in absolute terms but this does demonstrate admirable resilience in the context of plummeting deal numbers elsewhere.
Ian Gomes, Chairman of KPMG's High Growth Markets practice for KPMG in the U.K, said:
"China bucking the trend of falling deal numbers is nothing short of remarkable, considering the incredibly tough global economic environment for prospective trade buyers. Recent forays by the Chinese into the Australian natural resources sector also demonstrate the impact the Chinese government is having on its own corporate base, urging them on to clinch more strategic deals. The resulting media debate reminds us that these emerging to developed deals retain their ability to polarise opinion and that - despite their reduced number - they are likely to remain an important part of the M&A scene for some time to come."
Paul Chau, Head of M&A Advisory for KPMG Corporate Finance in Hong Kong, added:
"China's economic development is clearly a bright spot in 2009 and it is not surprising that Chinese companies have become a lot more buoyant on their global expansion plans. We continue to observe resilient M&A activities in natural resources and telecom sector. In the mean time, we are seeing some good signs of consumer and industrial sector deals. Many Chinese corporates have now developed useful overseas market knowledge and some have substantial target databases. More of them have also learnt the benefit of working with specialists in cross-border deals. At KPMG China we have experienced signs of rising in M&A deals and we are optimistic for the rest of year and 2010."
While the global decline in E2D deals was to be expecte - reinforcing the point that the emerging markets were not immune from the ravages of the credit crisis - KPMG commentators remain upbeat for those markets' future outbound M&A prospects, pointing to the fact that more strategically important deals are now being made and that activity between the emerging markets themselves remains strong.
For the purposes of the EMIAT, deals are monitored between a basket of 12 developed economies and a basket of 11 emerging, high growth economies, using data sourced from Zephyr.
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About the research
The research analysed 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 January 2003 and June 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
KPMG is a global network of professional firms providing Audit, Tax and Advisory services. We operate in 144 countries and have 137,000 people working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International, a Swiss cooperative. Each KPMG firm is a legally distinct and separate entity and describes itself as such.
KPMG China has 12 offices (including KPMG Advisory (China) Limited) in Beijing, Shenyang, Qingdao, Shanghai, Nanjing, Chengdu, Hangzhou, Guangzhou, Fuzhou, Shenzhen, Hong Kong and Macau, with more than 9,500 professionals.