London: UK firms lapped up Central and Eastern European assets in hunt for growth this year.
In a bid to escape sluggish economic conditions at home, UK firms have been on an M&A spending spree in Central and Eastern Europe according to KPMG's latest 'Emerging Markets International Acquisitions Tracker' (EMIAT).
UK firms acquired 19 companies in the CEE in the last year. India proved the most popular geography for UK firms for the first half of 2011, however, with 10 deals closing.
David Simpson, Global Head of M&A at KPMG, commented: "While UK corporate appetite for acquisition targets within the emerging markets is still below that of the feasting days of the boom years, we have seen UK companies becoming increasingly prepared to prise open their war chests of cash. There has been a slow and steady increase in the number of emerging markets acquisitions by UK companies since the crash and indeed we have seen 45% more deals in the first half of 2011, compared with the first half of 2009. And no wonder, given the bath-shaped economic environment faced by UK companies. However, current volatility has seriously dented confidence in recent weeks and it remains to be seen if this causes a step back in the steady progress we have seen in UK corporates' emerging markets deal ambitions.
"UK companies have shown a consistent level of interest in the CEE region over recent years, with geographical proximity and the regulatory synergies of EU member countries proving attractive. In terms of India, historical links have created a stable footing for deal activity on both sides with UK companies regularly looking to expand their operations into high growth India via M&A. Cultural differences — both social and corporate — should not be underestimated when doing deals: our research into deal success shows that transactions in emerging markets have a much greater risk of not delivering intended value."
The research analysed deal flows between 15 developed economies or groups of economies and 13 emerging economies or groups of economies from 2005 to the first half of 2011.
The 15 developed countries or groups are: U.K., U.S., Canada, Spain, France, Germany, Netherlands, Italy, Australia, Singapore, Hong Kong, Japan, Europe (Other), the Offshore Group and Oceania. The 13 emerging economies or groups are: Brazil, Russia & Cyprus, India, China, Central & Eastern Europe, the CIS, Malaysia, Southeast Asia, South Africa, Middle East & North Africa, sub-Saharan Africa, South America (excl. Brazil) and Central America & the Caribbean.
Established in 2003, EMIAT includes data from "completed" transactions where a trade buyer has taken minimum five percent shareholding in an overseas company. All raw data within the EMIAT is sourced from Thomson Reuters SDC and excludes deals backed by government, private equity firms or other financial institutions.