Central and East European countries emerged favourites for cross-border mergers in the first half of this year, but India along with China, Russia and Brazil remained popular targets despite the global slowdown, says a new study.
In the first half of 2009, US companies made the majority of their high-growth market acquisitions in China with 17 deals, Brazil with 13 and India with 12. In the second half of 2008, these countries accounted 45, 17 and 19 deals, respectively, says the study by global consultancy KPMG.
On the reverse, the top acquirer of companies in developed economies was India (39 deals) in the second half of 2008, followed by the Middle East with 25, China (21), Central and East Europe (13), and Russia and the Commonwealth of Independent States (CIS) with 13, according to the study.
In the first half of this year, Chinese companies were the top acquirers abroad with 16 deals, followed closely by Central and Eastern Europe with 12, Russia and CIS with 11, and India and South Africa with 10 each.
"India provides a perfect example of why it would be wrong to write off emerging markets' cross-border aspirations at this stage," said Arun Kumar, principal-in-charge of KPMG's US-India practice.
"While cross-border deals are down, India's economy is still growing, there is post-election optimism, banks remain liquid, and finance is available for the right deal," he said.
"Ambitious companies are awake to the fact that valuations are dropping. They continue to look abroad but with added caution after witnessing the challenges the global economy has placed on their own national champions in overseas ventures," Kumar added. "This caution will not last forever."
According to the study, even though US companies were hit hard by the economic downturn, their willingness for acquisitions in emerging market was a signal of their understanding that global footprint was critical for today's companies.
The study only took into account those transactions classed as completed between January 2003 and June 2009 in which an acquirer took at least 10 percent stake in an overseas company.
Deals that involved the backing by private equity firms or other financial institutions were not included in the study, titled "Emerging Markets International Acquisition Tracker."