Private Equity Perspective:
Opportunities in Emerging Markets
The amount of money invested in M&A transactions in emerging markets grew five percent to $162.4B
Amid the disappointing data about dealmaking in 2012, cross-border M&A provides a ray of hope. The amount of money invested in M&A transactions in emerging markets grew five percent to $162.4 billion, according to law firm Freshfields Bruckhaus Deringer. Less encouraging, however, deal volume in emerging markets was down 12 percent. Nonetheless, Freshfields expects the good news to continue in 2013.
In its study, Freshfields used the International Monetary Fund's designation of economies as emerging and developing. The 24 countries included are: China, Brazil, Russian Fed, India, Chile, Indonesia, Mexico, Turkey, South Africa, Malaysia, Poland, Argentina, Philippines, Venezuela, Thailand, Peru, Bulgaria, Romania, Estonia, Lithuania, Hungary, Ukraine, Pakistan and Latvia.
At $35 billion, China was the emerging-market country that attracted the most investment in 2012, according to the law firm. It was followed by Mexico, with $25.6 billion; Russia, with $18.6 billion; Brazil, with $18.2 billion; and Indonesia, with $13.7 billion. Meanwhile, India suffered a significant drop of 42 percent, to $10.3 billion.
The U.S. was the most acquisitive nation in growth markets, followed by Belgium, Hong Kong and Singapore. The U.S. committed more than $13 billion to these markets, the highest amount of investments in them since 2007 and an increase of almost 70 percent over 2011.
Incidentally, Belgium's high ranking on the buy side and Mexico's high ranking on the sell side are due primarily to the proposed $20.1 billion purchase by Anheuser-Busch InBev NB (NYSE: BUD) of Grupo Modelo (MM: GMODELOC). The U.S. Justice Department recently filed an antitrust lawsuit to block the deal, so those rankings may change.
"After a period where many investors have been concentrating on matters closer to home and have held off investing in higher growth markets, we are seeing a gradual return of corporate appetite for more sizeable investments in these economies," comments Edward Braham, global head of corporate at Freshfields. "2011 proved slow, 2012 was more active, and the early signs for 2013 point to dealflow in higher growth markets picking up further."
It's an area we'll be exploring in depth on Feb. 27, when Mergers & Acquisitions and Bank of America Merrill Lynch host a symposium on "International Transformation: Unlocking Value and Executing Abroad." The event will be held at the Standard Club in Chicago.
I'll be there, moderating a panel on "Global Market Entry Strategies," featuring, among others, the Jordan Co.'s Andrew Rice. The Jordan Co. was one of the first U.S. private equity firms to expand abroad. The firm has experience in establishing and acquiring operations in Europe, Asia, and Latin America, with particular expertise in China, where the firm established manufacturing resources as early as 1995.
Other speakers include BofA Merrill Lynch's Alister Bazaz, who will explain why it is critical to consider factors around financing early in the cross-border transaction assessment process.
For more on the event, visit our website, themiddlemarket.com.
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