Report: Cross-Border M&A Activity to Rise
Cross-border M&A activity is heating up as companies continue to expand beyond the BRICS countries (Brazil, Russia, India, China and South Africa) to include other high-growth markets. According to a report released by Baker & McKenzie, nearly half of all senior executives surveyed expect their company’s appetite for cross-border M&A to increase over the next two years. Companies based in high-growth market countries also reported targeting a wider range of jurisdictions to advance their growth strategies.
The report, based on a survey conducted by the Economist Intelligence Unit (EIU) on behalf of Baker & McKenzie, asked more than 350 senior executives across high-growth and developed markets for their views on the most important factors influencing the success of cross-border M&A transactions and the potential risks that could hurt their investments as they expand into new markets.
“Outbound M&A activity is shifting and we are seeing a greater number of deals involving high-growth market countries,” said Tim Gee, head of Baker & McKenzie’s Global M&A Practice. “It’s not just Western companies on the buy side anymore. Both developed and emerging market companies are chasing acquisition opportunities in new markets such as Indonesia, Turkey, Vietnam and the frontier markets that lie beyond. Findings from our survey are similar to the activity and interest we see from our clients, including the need to rethink strategy to maximize investment in unfamiliar markets.”
According to the survey, companies in emerging regions are willing to consider a much wider range of potential markets and to pursue targets in a larger number of countries than their developed-market peers (103 vs. 82). Many of these target markets, such as Cambodia, Chile, Latvia, Malaysia, Ukraine and several African countries have, until now, attracted little interest from most developed-market acquirers.
Companies in emerging markets also seem more likely to perceive positive benefits, with 47% stating cross-border M&A activity was very helpful to strengthening their market position and/or profitability, compared with 31% in developed markets.
The complete survey report and additional analysis, including specific country reports, is available at: www.bakermckenzie.com/highgrowthmarkets.