A rise in the number of high growth market (HGM) companies investing into mature markets is set to inject a new dynamism into cross-border mergers and acquisitions (M&A) in the coming years, says PwC in a new report titled "Resetting the Compass: Navigating Success in Deal-Making for Mature Market Sellers and High Growth Market Buyers."
The research shows that with major differences in the areas of heritage, international experience and decision-making, it is even more important for buyers from high growth markets and targets/sellers in developed markets to gain a clear understanding of each other's aims and ambitions in order to complete a successful deal.
"High Growth Markets" are identified as China, India, the Gulf States/Saudi Arabia, Russia and Brazil; while the 'mature market' consists of the US, UK, Germany, Australia, Japan and Canada.
Currently, HGM company acquisitions of mature market targets represent just 1.5% of global M&A and 5.3% of global cross-border deals; but this is on the rise. Large and mid-sized private companies have now joined the state-backed investors who were among the first to acquire mature market targets. And the range of industry M&A targets is also widening to include everything from energy, raw materials and engineering to media, retail and consumer goods companies.
Increasingly, HGM companies are unlocking or accelerating their domestic opportunities by acquiring state-of-the-art technology and expertise or buying into established global brands.
"Through deals, they are bringing their products and those of others to new countries by buying into established distribution channels, brand names and know-how," says John Dwyer, Global Deals Leader at PwC. "A growing number of HGM companies are already poised to go from being a national leader to a global one, and are using strategic M&A to accelerate that move."
The PwC report looks at how the rise of HGM companies acquiring mature market firms brings not just a change of direction to the M&A market, but a new dynamic. For HGM companies and mature market companies there can be contrasting differences in cultural, political and economic context and processes.
"There is no simple recipe for a great deal; but when the ingredients change, it becomes even more important that both buyers and sellers know what it is the other wants from the deal," notes Nick Page, PwC Transaction Services partner. "This issue came up repeatedly in conversations with our clients and deals partners worldwide."