India most acquisitive of emerging economies: KPMG
A study says of the four emerging economies of BRIC, India has recorded the largest number of mergers and acquisitions activity during the first half of 2007.Updated: Sep 13, 2007, 11:35 IST
India has emerged as the most acquisitive of emerging nations as the global spread of Indian enterprise in recent years led to the takeover of several major western and other companies, according to a new study.
Experts believe that the spate of mergers and acquisitions by Indian companies can be likened to the 'hunted fast becoming hunters' in the corporate boardrooms of global capital.
Of the four major emerging economies - Brazil, Russia, India and China (BRIC) - India recorded the largest number of mergers and acquisitions activity during the first half of 2007, according to KPMG's Emerging Markets International Acquisitions Tracker.
The study reveals that deal flow between emerging and developed economies is beginning to converge as companies from the BRIC nations start to ramp up their mergers and acquisitions activity.
The research, which analysed deal flows between nine selected emerging economies and eleven key developed markets, shows that companies from countries such as the BRIC nations are fast closing the gap on their counterparts in developed nations in terms of cross-border acquisitions.
The study reveals that nowhere is this rapid convergence between inbound and outbound deal flows more apparent than in China. But it adds that China still has some way to go to catch up with India - which was easily the most acquisitive of the emerging nations.
A total of 32 outbound deals were recorded in the first half of 2007 - an impressive figure that puts the country well on target to beat the 50 deals that took place during the whole of 2006.
Ian Gomes, chairman of KPMG's New and Emerging Markets practice for KPMG in Britain, said: "The large volume of outbound deals is indicative of the current mindset of many Indian companies; grow, acquire and utilise debt facilities to the full.
"Growing organically does not appear to be a favoured option for many Indian organisations - instead, getting a foot in the door quickly via the acquisition route is vital. They would argue that they have the money and are prepared to pay premium prices, so why wait?
"However, I recommend a degree of caution as there is a danger that in their haste to hit the acquisition trail, they could end up over-paying for assets."
While the number of deals involving a developed economy buying into an emerging economy is still much larger than that of emerging-into-developed, the gap is narrowing - and narrowing fast.
Key findings of the research:
-- During the first six months of 2007, there were 67 emerging-into-developed deals taking place, against 126 developed-into-emerging transactions.
-- A total of 119 emerging-into-developed deals took place in 2006, whereas there were 322 completions of the reverse kind.
-- This compares to a mere 49 emerging-into-developed deals in 2003, in contrast to 215 deals going in the opposite direction.
Gomes said: "Four years ago, the emerging-into-developed deals were outnumbered by four to one. By the end of 2006, that ratio was down to just under three to one, and already in the first half of 2007, that gap has narrowed even further, with the ratio now being less than two to one.
"This begs the question as to when one will overtake the other? Certainly looking at current trends, it's feasible that this crossover could happen within the next two to three years.
"There is perhaps an assumption that deal flow involving companies from emerging economies would by and large be one-way traffic, as companies in developed markets seek to gain a foothold in those fast-developing territories.
"However, the Tracker helps to dispel this theory, indicating that the hunted are fast becoming the hunters, with increasing numbers of companies in developing nations casting their eyes far beyond their own borders, putting their stamp on the international acquisition trail."
While China and India have been some of the most prolific of the emerging economies in terms of overseas acquisitions for some time now, other nations such as Russia and Brazil appear increasingly determined to play catch-up, the study reveals.