Search for growth drives rise in cross-border acquisitions


By Sabine Vollmer

Companies considering a merger or acquisition are increasingly looking for targets outside their own countries, according to the 2013 Grant Thornton International Business Report.

The global M&A appetite shrank last year – a year that was marked by sovereign debt crises in Europe, fiscal uncertainty in the US and political instability in the Middle East. Of the 3,500 senior executives Grant Thornton polled throughout 2012, 28% expected to participate in an M&A within three years.

Of the companies interested in M&A last year, 39% looked across borders in search of growth opportunities. That’s up from 34% a year earlier, and higher than any previous year.

The rise in cross-border transaction interest comes from mid-size companies and private-equity-backed businesses looking to expand globally, according to Grant Thornton. “The attraction and ease of accessing and entering new markets, especially those experiencing high growth, has enabled businesses of all sizes to have global ambition and operations,” Grant Thornton said in a separate report.

The appetite was particularly strong in Singapore (86%), the United Arab Emirates (66%), Peru (61%), Spain (61%) and the Netherlands (57%). Here’s a regional breakdown:

North America. Interest in cross-border transactions rose by more than 50% among US and Canadian companies in the past four years. Grant Thornton attributed this to significant corporate cash resources and easy access to capital in the US and a relatively stable Canadian economy. Amongst North American respondents considering an M&A in 2012, 38% were interested in a cross-border transactions, up from 37% a year earlier. 

BRIC countries. Companies in Brazil, Russia, India and China are among the most interested in cross-border transactions. Forty per cent of those considering a transaction in 2012 planned to go outside of their own country. That was up from 33% a year earlier. Grant Thornton suggested that more experienced and confident mid-market companies, particularly in Russia and China, are driving the interest. The rising number of private-equity firms financing corporate growth in Brazil is expected to boost interest in cross-border transactions.

Japan. Cross-border transactions remained important to Japanese companies in 2012, a year in which a strong yen supported a significant increase in M&A deals. Yoshi Kawamura of Grant Thornton Japan did not expect the drop in the yen’s value in recent months to affect the appetite, because domestic M&A opportunities remain scarce.

Europe. With the exception of Germany, European companies put less emphasis on domestic M&A to drive growth in 2012. Interest in cross-border deals remained high, with 44% of companies in mainland Europe planning a transaction outside the country.

Related CGMA Magazine content

Chinese, Japanese Firms Flex Muscles in Cautious M&A Environment”: Companies in China and Japan are taking advantage of the euro zone’s woes and low US asset valuations to find acquisition bargains in developed markets.

Where Private-Equity Firms Are Looking for High Growth”: Private-equity firms can no longer generate adequate returns for their investors by just leveraging debt and financial engineering. So they’re looking for untapped growth opportunities. A new survey reveals where they think they have found them.

The Most Business-Friendly Countries off the Beaten Path”: Small and mid-size companies looking for business-friendly markets overseas could check out a World Bank report that tracks regulatory reform efforts in 185 countries. Many of the top improvers are rarely found among up-and-coming economies.

Sabine Vollmer (svollmer@aicpa.org) is a CGMA Magazine senior editor.

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