labels: KPMG
India emerging a net exporter of takeover deals: KPMG news
21 August 2008

Ian P GomesMumbai: While it has predicted a decline in global M&A dealmaking (See: Decline in global deal activity predicted) consulting firm KPMG says that acquisitions by Indian firms will soon outnumber those inbound deals involving foreign firms snapping up Indian targets.

Overseas acquisitions by Indian companies in the developed countries from 2003 to 2007 stood at 322 finished deals against reverse deals of a total 340 during the same period, KPMG said in a study, released as part of the Emerging Markets International Acquisition Tracker (EMIAT), shows .

The EMIAT tracks trade buyer deals between emerging and developed economies on a six-monthly basis from the start of 2003 using data sourced from Zephyr.

With outbound deals of late having outnumbered inbound deals for each of the last three six-month periods, India seems well set to become a net 'deal exporter' in the next EMIAT in 2009, the report said.

''This is testament to the growing power of the Indian corporate base. At a time when everyone is talking about the credit crunch and sovereign wealth funds, Indian trade buyers have simply continued doing what they've been doing for several years now. As acquirers, they are now serious players on the world scene. In sporting terms, there is strength in depth here too; this is not just about the headline acquisition of Indian titans such as Tata.

This is about an ability to strike overseas deals filtering down throughout the Indian corporate scene,'' Ian Gomes, chairman of KPMG's New and Emerging Markets practice for KPMG in the UK, said.

''Becoming a net exporter of deals within the EMIAT - when it happens - is a credible enough achievement in its own right. However, it is all the more astounding when you realise just how far away the other BRIC economies are from achieving this feat. Within the EMIAT, in volume terms, India's outbound deals now equate to 95 per cent of their inbound total. By comparison, Russia boasts a 30 per cent figure, while China and Brazil lag further behind on twelve and nine per cent respectively,'' he said.

Gomes, however, struck a note of caution, pointing out that even the Indian powerhouse is not immune from the world's economic woes. Like anywhere else, the Indian economy is being affected by inflation and high interest rates, food and fuel prices. This will hit corporate profits and so may, in turn, delay investment spending.

''The next EMIAT's figures will show to what degree this has affected cross-border activity; although it is unlikely to be sufficient to endanger India's current EMIAT ranking as the most acquisitive emerging economy,'' he said.

The EMIAT figures for the first half of 2008 show 90 emerging-to-developed (E2D) deals set against 161 developed-to-emerging (D2E) deals. Indian buyers accounted for 50 of the 90 E2D deals and have been a major factor in helping the emerging economies narrow the gap on the developed economies' trade buyers. E2D deals now represent 56 per cent of the D2E total - a massive leap from the 21 per cent registered at the same time four years ago, the report said.

While the Indian numbers have steadily risen, the other emerging economies have tended to register static deal activity numbers. This suggests that they have found their level in terms of trade buyer activity and are now awaiting the next stage of development which will propel their companies on to the world scene as overseas acquirers, it added.

This compares with the the low levels of activity registered in Brazil where in the last five and a half years, just 28 E2D deals have been registered by Brazilian buyers despite the country's appeal to foreign investors, the report pointed out.

''Judged purely by the numbers, Brazil's trade buyers seem to be some way behind their Indian or even Russian counterparts. It's hard to say exactly why this is; maybe a lack of acquisitive tendencies, insufficient access to cash or debt or simply because sufficient domestic opportunities still exist, rendering overseas forays less important. Whatever the reason is, Brazil is rather being left behind in the BRIC charge overseas,'' Ian Gomes said.

American buyers appear to have well and truly reined in activity in the emerging markets. Having peaked with 99 deals in the second half of 2006, US outbound deals numbered 59 this time around more akin to activity levels last seen in 2003, KPMG said.

While American buyers remain the number one acquirers in each of India, Brazil and China, that honor goes to the UK when it comes to deals into Russia. In fact, the US is in danger of slipping into third place with the Netherlands now hot on their heels, it said.

While Indian buyers carried all before them, things don't look so good on the domestic front with just 17 inbound deals registered in six months. In fact, with the UAE registering 12 deals, India was in danger of slipping out of the top four altogether, the report said.


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India emerging a net exporter of takeover deals: KPMG