US-based companies are becoming more bullish in making overseas investments and, in the first half of 2013, merger and acquisition (M&A) activity from the US to developing countries sharply increased, according to consultancy firm KPMG’s latest High Growth Markets Tracker study. Despite recording an overall slowdown in high-growth market M&A from companies based in developed countries, KPMG found that US-based companies completed 116 high-growth market acquisitions in the first half of 2013, which was an increase from 110 in the second half of 2012.
The KPMG study, which tracks completed deals in which an acquirer took at least a 5% shareholding interest in a company, found that US-based companies were bullish in their expansion plans. South America, south and east Asia, as well as Central America and the Caribbean, emerged as the most popular geographic targets for these companies.
“US companies are exhibiting higher levels of confidence domestically and we are starting to see this translate into increased acquisition activity in emerging markets,” said Mark Barnes, the national leader of KPMG’s US high-growth markets practice, in an online statement. “The US was one of only a few developed economies to have an uptick in developed to high-growth-market deals, as overall deal activity was at its lowest since 2009.”
US-based companies also emerged as the most popular targets for emerging and high-growth market companies. A total of 31 acquisitions were made in the US in the first half of 2013. South and east Asia, as well as India, accounted for the majority of acquisitions made in the US in the period.
Nonetheless, despite the gains made by US-based companies, KPMG found that the overall volume of deals between developed countries and fast-growing economies dropped by 26%, from 228 acquisitions during the second half of 2012, to 169 in the first half of 2013. In addition, the decline in the number of deals involving Chinese acquisitions was also seen as a notable reflection of the rising costs of doing business with China, as 69 deals were recorded in the first half of 2013, which was a 16% drop from 83 projects in the second half of 2012.
South America, excluding Brazil, also experienced a notable drop in M&A activity. Some 44 deals between developed and high-growth market companies were recorded in 2013, compared to 66 deals in the last six months of 2012. South and east Asia suffered a more significant drop of 19%, down from 108 deals in the second half of 2012, to 88 in the first half of 2013.
“Although high-growth to developed-market transactions have declined over the past year, the US continues to hold attractive investment options for companies around the globe looking to accelerate growth by making acquisitions that expand their geographic footprint,” said Phil Isom, the head of KPMG corporate finance in an online statement. “In terms of the uptick in developed to high-growth-market deals, the US’s market conditions, highlighted by relatively easy access to capital, elevated cash levels on corporate balance sheets, and low interest rates, have resulted in an increased capacity for US-based companies to do deals.”