China Bucks Declining Trend in Cross-Border M&A Deals

While 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, China’s deal activity has remained remarkably constant since the beginning of 2007.


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% down on the latter half of 2008, and the lowest six month total since the first half of 2005.


KPMG says that 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.

However, KPMG notes that 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,” says KPMG.

While the global decline in E2D deals was to be expected — reinforcing the point that the emerging markets were not immune from the ravages of the credit crisis — KPMG remains 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.

India: Still Most Acquisitive

At a country level, India is the big talking point of the latest EMIAT, recording just ten E2D deals. India has been the most acquisitive of the emerging markets since the first half of 2004 but it has now relinquished its usual crown to China (16 deals) and has even been beaten back to fourth place behind Central & Eastern Europe (12 deals) and Russia (11). India’s fall in the rankings is perhaps all the more spectacular for the fact that it registered 63 deals in the corresponding period last year.

Despite this, India comfortably retains its place as the most acquisitive nation overall, recording 410 E2D deals since the EMIAT began in 2003. China is a distant second on 179, followed by the Middle East on 145. The U.S. remains the ‘destination of choice’ for E2D deals with 351, followed by the U.K. on 250.


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