Emerging markets grab the M & A action
Asian countries now make up half the top ten deal destinations. Vicky Meek looks at the rise and rise of Asia and the Gulf states.
As developed markets face, at best, low growth over the next few years, companies are increasingly looking to emerging markets for new business opportunities. These markets have captured a rising proportion of global mergers and acquisitions in recent years. But which countries are ripe for investment and where should dealmakers be looking next?
New research from the M&A Research Centre (MARC) at Cass Business School and Ernst & Young offers an intriguing glimpse into the world's most attractive M&A markets. The M&A Maturity Index, published annually, ranks 148 countries according to their ability to attract and sustain M&A activity.
Scott Moeller, Professor in the Practice of Finance at Cass and Director of MARC, says: "The index analyses factors such as regulatory, political, economic and financial environments together with technological capability, the availability of assets and socio-economic characteristics to draw out how attractive each country is for domestic and inward M&A deals."
USA tops table
In the latest index, the USA tops the table with Singapore in second and the UK third. Asian countries now make up half the top ten M&A destinations with Singapore joined by Hong Kong (4), South Korea (5), China (9) and Japan (10).
"Singapore and Hong Kong's high ranking is driven mainly by their well-developed infrastructure, the availability of companies with assets valued at over $1 million to purchase and business-friendly regulatory environments," says Professor Moeller. "This contrasts with most of the other top ten countries, which mainly owe their competitive advantage to high levels of technological development, including high-tech exports and innovation in terms of patents filed, which demonstrates a highly skilled business community that can attract investment interest."
Future hot spots
With close to 40% of deals completed since 2009 taking place outside US and European markets, the rankings also offer a valuable insight into future M&A hotspots. Among the rising stars is the UAE, which has leapt six places to 20th in the past five years, albeit falling by one position since 2011.
"While political stability remains an issue in many Middle Eastern markets, the changes should mean that economies in the region become more open," says Professor Moeller. "There is a huge amount of wealth from oil and much has been done with this to improve infrastructure - both physical and financial - and that is attracting companies and business."
Malaysia's jump of seven places to 18th in the rankings over five years has been driven by significant improvements to its regulatory and political environments. Other high-climbers over the past five years include Poland (up five to 30) Romania (up 13 to 36), Turkey (up seven to 37), India (up five to 38), Kazakhstan (up six to 40) and Morocco (up eight to 47).
Unsurprisingly, the rise of emerging markets has come at the expense of developed countries in Europe, where the economic problems afflicting traditional M&A markets are reflected in the ranking changes. Germany, the Netherlands, Switzerland, Austria, Sweden, Italy and Finland have all fallen in the rankings over the past five years, while Greece (53), unsurprisingly, has fallen 12 places since 2011 and 23 places in the past five years.
Vicky Meek is a frelance journalist. She can be contacted at firstname.lastname@example.org