Emerging Market Companies Eye U.S. Targets Above Others in First Half of 2010: KPMG Study

NEW YORK, Aug. 23 /PRNewswire/ -- U.S. companies were the most popular targets for acquisitions by emerging and high-growth market companies in the first half of 2010, as activity by emerging market companies aimed at developed economies jumped 25 percent over the previous six-month period, according to KPMG International's latest Emerging Markets International Acquisition Tracker (EMIAT) study.

The KPMG study revealed that in the first half of 2010, emerging and high-growth market companies acquired 54 U.S. companies, while Chinese companies were the leading emerging and high-growth market targets for U.S. companies.

Emerging and high-growth market companies made 243 acquisitions in developed economies in the first half of 2010, up from 194 during the second half of 2009, according to the KPMG study which tracks completed deals in which an acquirer took at least a five percent shareholding interest.  India was the top acquirer in emerging-to-developed deals (E2D) in the study, with 50 acquisitions in the first half of 2010.

"The latest EMIAT study findings and other recent KPMG research continues to indicate that emerging market companies are taking advantage of their rapid rebound from the global financial crisis to invest where they see opportunities," said Mark Barnes, principal-in-charge of KPMG LLP's U.S.-High Growth Markets practice.  "In contrast, companies in developed economies may be waiting on the sidelines until concerns about the prospect of a 'double-dip' recession and sovereign debt fall-outs recede before pursuing M&A activity more aggressively," Barnes added.

U.S. Acquisitions in Emerging Market Countries Remain Steady

According to the KPMG study, developed-to-emerging (D2E) deals increased nine percent overall in the first half of 2010 – climbing to 748 deals versus 687 registered in the previous six-month period.  U.S. companies made 126 acquisitions in emerging market economies in the first half of 2010, compared with 125 in the second half of 2009.  The number of acquisitions made by U.S. companies in the first half of 2010 ranked second behind the "other European countries" category (230).

"While U.S. acquisitions of companies in emerging markets has remained essentially unchanged when compared to the prior six month-period, this is consistent with overall U.S. deal activity which was relatively flat in the first half of 2010," said Dan Tiemann, U.S. lead partner of KPMG's Transactions and Restructuring Services group.  "This activity will likely increase as more companies consider acquisitions as a way to drive intelligent, profitable growth."

U.S.-based companies made the majority of their high-growth market acquisitions in China (20), India (19), Central America and the Caribbean (18), South America (excluding Brazil) (14), and Southeast Asia (13) in the first half of 2010, as reported by KPMG.

In the second half of 2009, the top emerging and high-growth market targets for U.S. companies were located in China (21), India (20), South America (15), Russia (14), and Brazil (13), according to the KPMG study.

For D2E deals globally in the first half of 2010, Russian companies were the most targeted (159).  Other popular targets overall for D2E deals included Southeast Asia (85), China (82), Central and Eastern Europe (73), and the Commonwealth of Independent States (CIS) (66), the KPMG study indicates.  

In the second half of 2009, the most popular emerging and high-growth market targets overall for D2E deals included Russia (141), Southeast Asia (88), China (80), CIS (69), and Central and Eastern Europe (64), the KPMG study indicates.  

Emerging Market Deals Trending Up

India (50) was the leading emerging market acquirer of companies in developed economies in the first half of 2010, followed by Southeast Asia (47), China (39), Malaysia (30), and Central America and the Caribbean (17).  

"Indian companies are once again active in cross-border acquisitions, where past performance indicates they learn new skills and capabilities from their targets and take a slower, more deliberate approach when integrating operations," said Mohit Chandra, a KPMG principal in India and author of a recent KPMG white paper on emerging market acquisition trends.  "As a group, emerging market company executives tell us that they understand that completing deals in developed economies requires careful planning, flexibility and a customized approach."

New Era of Emerging Market Multinationals

In the first half of 2010, there were 98 total emerging-to-emerging (E2E) deals with Southeast Asia the most popular target, registering 20 inbound deals, according to the KPMG study.  Sub-Sahara Africa (excludes South Africa) was the second most popular target with 14 deals, ahead of China with 11.  

India was tied with Southeast Asia as the leading emerging market acquirer in other emerging markets with 18 deals.  Russia made 13 such deals.

"It appears that a new breed of emerging market multinationals are establishing footholds in the world's fastest growing markets," said KPMG's Barnes.  "These high-growth markets include the most populous nations in the world, offering opportunities to grow market share, introduce new products and obtain resources and talent."

Summary Statistics

After the United States (54), the most popular targets for E2D deals in the first half of 2010 included Europe -- other (23), Hong Kong (21), the United Kingdom (20), and Japan (19), according to the KPMG study.

In the second half of 2009, the top high-growth market acquirers of companies in developed economies were Southeast Asia (34), China (30), Malaysia (26), India (21), and Russia (20), according to the KPMG study.

About KPMG's Emerging Markets International Acquisition Tracker Study:

The research analyzed deal flows between 15 "developed" economies or groups of economies and 13 "emerging" and "high-growth" economies or groups of economies. The 15 developed countries or groups include the United Kingdom, the United States, Canada, Spain, France, Germany, the Netherlands, Italy, Australia, Singapore, Hong Kong, Japan, Europe (other), the Offshore Group and Oceania.  The 13 emerging economies or groups include Brazil, Russia, India, China, Central & Eastern Europe, the Commonwealth of Independent States, Malaysia, Southeast Asia, South Africa, Middle East & North Africa, sub-Saharan Africa, South America (excludes Brazil) and Central America & the Caribbean.  All raw data within the EMIAT is sourced from Thomson Reuters SDC. Only those transactions classed as "completed" between January 2003 and June 2010 -- in which an acquirer took at least a five percent shareholding in an overseas company -- were included. Deals which involved backing by government, private equity firms or other financial institutions were not included.

About KPMG LLP's U.S.-High-Growth Market practice

The KPMG LLP U.S.-High-Growth Markets practice provides audit, tax and advisory services to U.S.-based companies in their pursuit of outbound investment opportunities in high-growth and emerging markets such as China, India, Brazil, Russia, Mexico and Vietnam, and high-growth market-based companies with inbound investment interest in the United States.

About KPMG LLP

KPMG LLP, the audit, tax and advisory firm (www.us.kpmg.com), is the U.S. member firm of KPMG International Cooperative ("KPMG International").  KPMG International's member firms have 140,000 professionals, including more than 7,900 partners, in 146 countries.

SOURCE KPMG LLP