U.S.-based companies increased mergers and acquisitions (M&A) activity in emerging and high-growth markets in the first half of 2013 amidst a slowdown in overall developed-to-high-growth market (D2H) deal volumes, according to KPMG International’s latest High Growth Markets Tracker study.
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. companies completed 116 emerging and high-growth market acquisitions in the first half of 2013, up from 110 in the second half of 2012. Overall, D2H deal volume dropped 13 percent – from 607 in the second half of 2012 to 526 in the first half of 2013.
“U.S. companies are exhibiting higher levels of confidence domestically and we’re starting to see this translate into increased acquisition activity in emerging markets,” said Mark Barnes, national leader of KPMG’s U.S. High Growth Markets practice. “But the United States was one of only a few developed economies to have an uptick in D2H deals, as overall D2H deal activity was at its lowest since 2009.”
The most popular geographic targets for U.S. companies in the first half of 2013 were Brazil (25), India (18), South American countries excluding Brazil (15), South and East Asia (15), and Central America and Caribbean (14). South and East Asia (88) and China (69) were the most popular targets for D2H deals overall.
High-Growth-to-Developed (H2D) Deal Volumes Drop Too
Overall, H2D deal volume dropped 26 percent – from 228 acquisitions during the second half of 2012 to 169 in the first half of 2013 – according to the KPMG study.
U.S. companies remained the most popular targets for emerging and high-growth market companies with 31 acquisitions made in the United States in the first half of 2013, down from the 52 deals completed in the second half of 2012. South and East Asia (9) and India (7) accounted for the majority of acquisitions made in the United States in the first half of 2013.
“H2D transactions fell to their lowest level since 2005,” said Barnes. “Many high growth market companies are taking a ‘wait and see’ approach before investing in developed economies because many of them are experiencing varying degrees of economic uncertainty.
“However, the United States continues to remain the developed market of choice for H2D deals due to its many positive attributes including market size, plentiful resources, and skilled workforce,” added Barnes.
Overall, South and East Asia (31) and China (29) were the top acquirers in H2D deals in the first half of 2013.
“Although high-growth-to-developed market transactions have declined over last year, the United States continues to hold attractive investment options for companies around the globe looking to accelerate growth by making acquisitions that expand their geographic footprint,” said Phil Isom, head of KPMG Corporate Finance LLC. “In terms of the uptick in developed-to-high-growth market deals, U.S. market conditions, highlighted by relatively easy access to capital, elevated cash levels on corporate balance sheets, and low interest rates, have resulted in an increased capacity for U.S. companies to do deals.”
H2H Deals Continue to Drop
In the first half of 2013, there were 110 total high-growth-to-high-growth (H2H) deals, down from 131 in the second half of 2012. The Commonwealth of Independent States was the most popular regional target, registering 26 inbound deals, according to the KPMG study. Russia was the leading emerging market acquirer with 35 deals.
About KPMG’s High Growth Markets 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 2005, the study includes data from “completed” transactions where a trade buyer has taken a minimum 5 percent shareholding interest in an overseas company. The study is produced every six months to give an up-to-date overview of cross-border M&A activity, with the current edition featuring deals between January and July 2013. All raw data within the study 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 Markets practice
KPMG’s High Growth Markets practice helps companies navigate the complex challenges and risks associated with inbound and outbound investment and capitalize on growth opportunities. The practice provides audit, tax and advisory services to U.S.-based companies in their pursuit of outbound investment opportunities in high-growth markets such as China, India, Korea, Brazil, Russia, Mexico, ASEAN, Africa and beyond, and to 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 152,000 professionals, including more than 8,600 partners, in 156 countries.