EM M&A Activity

Considering how much growth has come from emerging markets over the last five years, it's strange that EM M&A activity has been so much lower than Western M&A activity over the last five years. Emerging market IPOs have long dominated the West. Just last quarter, Asian IPOs amounted to $70B, much more than the $16B of the US. 6 of 2009's 10 biggest IPOs were in EM. But EM M&A has never been equal to European or US M&A for any full quarter. Q1 2010 might well be the first quarter to break this trend. For the first 1.5 months of the year, EM M&A has equaled 40% of global M&A activity, about equal to US + European M&A for the same time period.

Historical and projected EM, US, and EU growth:

2010 GDP Growth Forecast Historical (2004-2010)
China 9.0 10.2
India 7.3 8.2
Russia 4.0 4.3
USA 2.5 1.7
Canada 2.0 1.6
France 1.4 1.2
UK 1.2 1.1
Germany 1.4 0.8
Japan 1.8 0.6
Italy 1.1 0.2

With EM growth to even further eclipse those of Western nations in the future, the role of EM will play an increasingly important role in the global M&A game. Figures from the Business Monitor International point to what changes lie ahead:

1. Heightened importance of EM deals to investment banks. In the y-t-d, investment banks have made 17% of their global revenues from EM, according to Dealogic, up from 15% in the whole of 2009.

2. There is plenty of capital in EM. Savings ratios in EM are much higher than in the West. EM have had to spend much less capital on legacy debt issues.

3. Contagion and default fears are terrible for deal making. According to a survey by Kreab Gavin Anderson, based on 30 M&A lawyers across the world, continuing volatility in European capital markets sparked by the Greek debt crisis is weighing on European deal activity.