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% 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.
"China bucking the trend of falling deal numbers is nothing short of remarkable, considering the incredibly tough global economic environment for prospective trade buyers,” says Ian Gomes, Chairman of KPMG's High Growth Markets practice for KPMG in the U.K. “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, adds that 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,” says Chau. According to Chau, many Chinese corporates have now developed useful overseas market knowledge and some have substantial target databases.