KPMG’s Emerging Markets International Acquisition Tracker found that U.S.-based companies were the most active in completing M&A deals with emerging and high-growth market companies in the first half of 2012. However, the study found that deal activity dropped nearly 33 percent compared to the first half of 2011.
The semi-annual KPMG study tracked completed deals where an acquirer bought at least a 5 percent stake. According to the study, U.S.-based companies completed 108 emerging and high-growth market acquisitions in the first half of 2012, down from 160 in the first half of 2011.
The decline corresponds with an international slowdown in developed-to-high-growth market deals, which dropped 15 percent--661 in the first half of 2012 versus 778 in the first half of 2011. The study noticed that companies that are in the "other European countries" category made the second-most acquisitions of emerging market companies with 81 in the first half of 2012. According to the study, the U.S. was mostly drawn to targets in Brazil, Central America and the Caribbean as well as South and East Asia.
"The M&A slowdown is impacting mature and high-growth markets alike," Mark Barnes, principal-in-charge of KPMG LLP's U.S. High-Growth Markets practice said in a statement. "But there are pockets of bright spots, as we see China a leading buyer of companies in developed economies, Brazil a top destination for acquisitions by companies in developed economies, and U.S. companies still acquiring companies in high-growth markets although deal volume is down."
Nonetheless, the report stated that U.S. companies are still the most popular targets for emerging market countries. In the first half of 2012 there were 47 acquisitions made in the country, which more than doubled the number of deals made by companies in the other European countries category. South and East Asia, China, and Central America and the Caribbean accounted for the majority of acquisitions made in the States in the first half of 2012.
The United States was also the most targeted country in the second half of 2011 with 49 acquisitions made by emerging and high-growth market companies.
The study revealed that emerging and high-growth market companies made 203 acquisitions in developed economies in the first half of 2012, down from 219 during the first half of 2011. South and East Asia and China were the lead buyers in high-growth-to-developed deals in the first half of 2012.
"Potential U.S.-based acquirers are sitting on a lot of cash, which could cause a brighter second half, but, at this point, they are being very careful about how they deploy it," Dan Tiemann, partner and U.S. leader of KPMG's Transactions and Restructuring practice, said in a statement.
In the first half of 2012, there were 115 total high-growth-to-high-growth deals, down from 166 in the first half of 2011. Buyers focused on Central and Eastern Europe to find potential targets. KPMG’s study reported there were 21 inbound deals that took place, and Russia was the leading emerging market acquirer in other emerging markets with 23 deals.
"While deals between companies in high-growth markets are down, these companies are still seeing opportunities in developed economies," said Barnes. "In some cases, the Eurozone crisis and low asset values in the United States have encouraged countries which are not traditionally seen as acquirers, such as Indonesia and Thailand, to make deals.
"Due to uncertain economic conditions, some companies in developed economies are holding off on making acquisitions in high-growth markets," added Barnes. "But we see pent-up demand as many of these high-growth markets are still attractive and have proved to be self-sustaining due to domestic consumption and growing middle class, which could signal an increase in acquisitions of high-growth market companies when economic conditions improve."
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