India is FTSE 100’s Top Emerging Market Destination for M&A

India has emerged as the FTSE 100’s developing market destination of choice from the past decade. It attracted US$31 billion of investment across 145 deals - more than any of the other BRICS - ranking as the FTSE’s fourth most targeted nation overall.

The FTSE 100 Index is a capitalisation-weighted index of the 100 most highly capitalised companies traded on the London Stock Exchange.

 

M&A statistics from the past decade, analysed by international law firm Freshfields Bruckhaus Deringer, offer a comprehensive picture of Britain’s leading companies’ investment trends. They spent $645 billion across 3,967 deals globally, with more than three quarters (81%) of that investment targeting just 10 countries. The UK and US accounted for the lion’s share – more than half (51%).

 

The research also reveals that 26% of deal investments by the FTSE 100 were in UK companies and 25% in US companies, with US deals being larger on average ($168bn was invested in 1,074 UK deals and $163bn in 741 US deals).

 

Canada was the next most favoured country for investment, with 8% ($51bn invested across 107 deals), although the total is skewed by one deal (Rio Tinto’s acquisition of Canadian-based Alcan, a manufacturer of aluminium, for $43bn in 2007).

 

China does not make the top ten most targeted nations by value (it ranks 14th). It secured just 1% of the FTSE 100’s total M&A investment (with $8bn across 111 deals).

 

Russia attracted 3% of the FTSE 100’s M&A spend ($16bn across 41 deals). It is followed by South Africa with 2% ($14bn across 105 deals) and Brazil with 2% ($14bn across 71 deals).

 

Other M&A hotspots include Spain, which attracted 4% ($28bn across 103 deals), Australia with 4% ($26bn and 123 deals) and Sweden with 2% ($14bn and 58 deals).

 

"The FTSE 100 have continued to globalise their businesses over the last 10 years," says Edward Braham, global head of corporate at Freshfields. "For several companies, only a relatively small proportion of their global turnover and operations are now in Britain."

 

The FTSE 100 investments over the past decade have been geographically concentrated, with more than three quarters targeting just 10 countries. When it comes to searching for faster growth, India has tended to be the front runner over the last 10 years.

 

"India has been more open to international investment in a range of sectors over the past decade, particularly those that are capital-intensive and have needed international expertise," says Pratap Amin, Chairman of the firm’s India Group. "British companies have been keen to capitalise on the opportunity and make the most of established historical, cultural and diplomatic ties. There have also been some significant strategic collaborations in key sectors which have contributed to an increasing flow of investment."

 

"While Indian deal activity is undergoing a temporary slowdown, partly due to uncertainty over forthcoming political elections, India remains an important international destination for M&A. Stocks are at historic highs and private equity houses are also starting to eye up opportunities there again."Examples of FTSE 100 deal activity in India include BP’s strategic collaboration with Reliance Industries, a Mumbai-based conglomerate, for $7.2bn in 2011.

 

"By comparison, growth in China has been largely organic over the past decade and many international companies have gained a foothold in the region by pursuing joint venture models rather than outright acquisitions. International buyers have also faced restrictions when acquiring larger high-quality assets, which are typically state-owned," adds Braham explaining why it ranks outside of the top ten targets by value.

 

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