M&A deal volumes down for emerging markets in 2012-survey

NEW YORK, April 4 Wed Apr 3, 2013 11:59pm EDT

NEW YORK, April 4 (Reuters) - Mergers and acquisitions activity among developed and emerging markets fell in 2012 with the fewest number of completed deals since the peak of the financial crisis in 2009, a new survey showed on Thursday.

The number of completed deals fell 11.8 percent last year versus 2011, according to audit, tax and business advisory services firm KPMG.

In its latest Emerging Markets International Acquisition Tracker (EMIAT) study, the deal flow dropped to 1,994 from 2,260. There were 1,935 deals completed in 2009.

"Due to uncertain economic conditions, many companies held off on making acquisitions even though they had cash to deploy," Mark Barnes, national leader of KPMG's U.S. High Growth Markets practice, told Reuters in an e-mail.

"But we are seeing pent-up demand in the marketplace as companies are looking to make deals in other markets and expand as part of their growth strategies," Barnes said.

Three broad categories of M&A activity were tracked by KPMG using Thomson Reuters data: developed market acquirer's of emerging- and high-growth market assets and vice versa; and acquisitions of one emerging- and high-growth market company by a peer in another emerging- and high-growth market.

Overall the deal volume between high-growth emerging markets fell just over 24 percent last year to 225 completed transactions, down from 297 in 2011.

U.S.-based companies were the most popular targets for M&A activity by emerging-market buyers, albeit at a slower pace than the prior year. The number of transactions, at 92 for the year, represented a 9.8 percent decline from 2011 totals.

"The U.S. is a sound investment destination for companies based in emerging markets looking to expand their geographic reach, and as a result, many of these companies are actively pursuing transactions in the U.S. that align with their growth strategies," Dan Tiemann, KPMG's Americas lead for Transactions & Restructuring, said in a statement.

"On the outbound side, we're seeing U.S. companies flush with cash looking to emerging markets for growth opportunities," Tiemann said.

In 2012, U.S.-based companies were the biggest buyers of assets in emerging markets with 213 transactions. However, that represented a 25 percent drop from the prior year.

Overall, the number of transactions whereby developed market buyers acquired emerging-market assets fell 12.6 percent in 2012 versus 2011, the data showed.

South East Asia businesses were the biggest target of developed market buyers with 235 deals while assets in the Commonwealth of Independent States (CIS) were the least desired with 32 transactions last year.

"Developed markets are showing more stable levels of confidence domestically, but this is not translating into higher acquisition activity in emerging markets," Barnes said.

Viewing the transactions from an emerging markets perspective, Chinese buyers completed 81 purchases in developed market assets, the most last year. The fewest number of acquisitions, two, were completed by investors from the CIS.

A deal was considered in the survey if an acquirer took at least a 5 percent shareholder interest. However, deals that involved backing by government, private equity firms or other financial institutions were excluded.

The research analyzed deal flows between 15 developed economies or groups of economies and 13 high-growth economies or groups of economies. (Reporting By Daniel Bases; Editing by Maureen Bavdek)