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RISK: D2E M&A activity hits 10-year low: KPMG | Canadian Insurance
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RISK: D2E M&A activity hits 10-year low: KPMG

But deals involving acquirers in emerging markets and targets in developed markets increased by 2 percent

Companies in developed markets bought far fewer companies in emerging markets in the second half of 2015 than in previous years, KPMG’s Cross-Border Deals Tracker report found.

Such D2E M&A deals fell by three percent between July and December 2015, its lowest level in a decade.

The first half of 2015 also saw few such deals, leaving the annual total 9 percent lower than in 2014.

This decline may have been triggered by slower growth rates in China, low interest rates in the U.S. and economic challenges in Russia, the Middle East and South America.

India, however, proved to be an exception: inbound D2E transactions increased by over 50 percent, leading to 54 deals.

But deals in which both investors are targets are in emergent markets (E2E) rose by 25 percent in the second half of 2015, though the first half of the year was slower. The Chinese, central and eastern European, sub-Saharan African and South and East Asian markets were especially active.

“We are hitting a new era in emerging markets,” said Leif Zerz, KPMG’s global head of deal advisory. “There has been a maturation over the last few years and emerging market companies are more comfortable with larger and more complex deals. China and [central and eastern Europe], for instance, are not shying away from significant investment in the right markets despite market volalitity. While regulatory environment will be a strong driver for deal making, like the financial services sector in Europe, we expect developed countries investments to stay within their safe havens.”

As for acquirers in emerging markets and targets in developed markets, deal volumes increased by 2 percent.

These E2D deals increased the most in central and eastern Europe, the Middle East and North Africa, and Russia.

Many E2D targets were located in the UK, Australia, Germany and Japan.

“Given today’s economic volatility, we expect developed markets to focus more on regions where they currently operate, while emerging market players will seek targets in both other emerging markets and developed market areas,” says Phil Isom, KPMG’s global head of M&A.