G7 M&A deal activity makes strong comeback in emerging markets

In January 2015, companies based in G7 countries announced $4.7 billion worth of acquisitions in the emerging markets, according to Deloitte. This was nearly three times the $1.5 billion announced by emerging market companies in G7 markets.

This reverses the picture for the whole of 2014 when, for the first time, total outbound M&A investment by emerging markets’ companies into the G7 (at $32.9 billion) was higher than in the other direction ($32.3 billion).
 
Iain Macmillan, head of M&A at Deloitte, commented: “Challenging economic conditions and political uncertainty caused a major slowdown in the value of acquisitions by G7 companies in emerging markets.  

“However, this period of nervousness could be coming to an end, and time will tell whether January’s comeback is sustained into 2015. Investor pressure on companies to find new sources of growth is likely to cause G7 companies to start rediscovering their ambitions in emerging markets. Last year’s retreat may have been an overreaction, as the emerging markets still offer excellent long-term growth prospects.”
 
By region, China is the most active emerging market country that is investing into G7 markets.  In 2014 alone they announced $20 billion worth of investments into these countries.  This was followed by Mexico ($2.8 billion) and Russia ($1.7 billion) in overseas M&A deals.

Looking back over a decade, last year’s scale back by G7 economies reduced outbound values (at $32.9 billion) back towards the 2004 figure of $31.7 billion. In contrast, emerging market outbound activity nearly trebled from $11.1 billion in 2004, to $32.9 billion in 2014.

Iain Macmillan concluded: “In the longer-term, the growth potential of emerging markets remains compelling, creating global companies that are increasingly setting the M&A agenda in G7 markets. Meanwhile, the quest for growth by G7 companies may see 2015 being the year when their pace of investment into selected emerging markets recovers some of its past momentum.

“How these two flows of capital play out may well dictate the shape of the key players on the global economic stage in the coming decade. Recently we have seen the Chinese conglomerate Dalian Wanda signalling its intention to buy Infront Sports & Media highlighting continuing Chinese ambition. With China’s authorities raising the approval threshold for outward investment from $250 million to $1 billion, we expect this would give a major boost to M&A activities by Chinese companies. I would also expect to see further M&A activity within and from the new markets of Turkey and Mexico as well as more established markets such as India.”

End

Notes to editors

*Below are the G7 and emerging market countries considered for Deloitte’s analysis:

• G7: Canada, France, Italy, Germany, Japan, UK and USA
• Emerging markets: Brazil, China, Czech Republic, Egypt, Hungary, India, Indonesia, Malaysia, Mexico, Morocco, Peru, Philippines, Poland, Russian Federation, South Africa, Taiwan, Thailand, Turkey, Saudi Arabia, United Arab Emirates.

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