The value of global M&A investments targeting the world’s key growth markets surged by 5% in 2012 (to US$162.4 billion) compared to the previous twelve months, according to a new analysis by international law firm Freshfields Bruckhaus Deringer. It follows a drop of almost 25% recorded the previous year (2011 compared to 2010).
While the value of deals grew, the total number of deals targeting these markets fell 12% (to 2,796). That is still a lot better than global M&A in 2012, when the market dropped almost 5% in value terms and 9% in volume terms compared to 2011.
"2011 proved slow, 2012 was more active and the early signs for 2013 point to deal flow in higher growth markets picking up further," says Edward Braham, global head of corporate at Freshfields.
Last year’s M&A activity targeting higher growth markets was largely dominated by acquisitions in Food and
Beverage, Insurance, Metals and Mining and Banking sectors. These combined accounted for almost 45% of all investments.
The US led the ranking of most acquisitive nations in growth markets, followed by Belgium (though mainly as a result of one Anheuser-Busch InBev deal), Hong Kong and Singapore.
The UK followed, but more than halved its overall investment directed at higher growth markets ($10.7bn in 2012) compared to 2011. Interestingly the US committed the highest amount of investments in these markets since 2007, an increase of almost 70%, to over $13bn, on the previous year.
At $35bm, China attracted most investment in 2012, followed by Mexico ($25.6bn); Russia ($18.6bn), Brazil (18.2bn) and Indonesia ($13.7bn). Mexico, spurred by the $20 plus billion Anheuser-Busch InBev deal, and Turkey, witnessed some of the biggest increases in inward investment compared to 2011 (of 276% and 60% respectively), whereas India suffered a significant drop of 42% (to $10.3bn).
"2012 proved quite a difficult year for deal making in high growth markets. What were already weak macro economics in developed markets fell under siege from successive ‘euro zone crises’ and the ‘US fiscal cliff’, with business confidence remaining under pressure and hesitancy about investing in meaningful deals further afield. Increased shareholder scrutiny of deals may also have been a factor in discouraging deal flow."
"Looking forward, absent any global shocks I expect global M&A activity in 2013 to continue at similar levels to the second half of 2012. Cross-border M&A involving the higher growth economies will be a key area to watch in the year ahead," says Braham.