Their acquisitions of Western firms doubled to $80 billion last year
NEW YORK: Wall Street, which has been mesmerised by the sheer speed with which India’s Tata Group has been buying up global brands (Tetley Tea, Ritz Carlton Boston, Corus Steel, Eight O’Clock Coffee, Jaguar, and Land Rover, among others), is convinced that the “strongest growth segment” in global mergers and acquisitions is dominated by emerging market buyers scooping prize assets in developed markets.
“Emerging market (EM) acquisitions of developed market assets more than doubled last year to $80 billion and represented 43% of all deals closed by EM buyers,” said Michael Hartnett, head of global emerging market strategy in Merrill Lynch, in New York.
EM buyers closed out over 400 deals last year totaling $192 billion. The majority of these were for EM assets, totaling $112 billion, while the remaining $80 billion went into buying assets in Western markets.
Wall Street insiders say emerging market buyers, if they are so inclined, can buy a Ford and a General Electric and still have money left over for ice cream.
“For every one emerging market M&A announcement in 2003 there were almost four last year, taking EM’s share of global M&A activity to 28% (in 2007),” added Hartnett describing India, China and other EM buyers as “the new players”.
Wall Street says emerging markets are still running huge current account surpluses and excess savings are increasingly being recycled via capital markets activity.
“The strongest growth segment in global M&A in recent quarters is emerging market buyers of developed market assets. EM buyers currently account for 15% of M&A deals announced globally up from 6% in 2003,” said the Merrill Lynch report released Thursday in New York.
Sensing the direction of global M&A activity, ICICI Bank opened a branch in New York two months ago to get a piece of the action. “India is showing a 9% growth and Indian companies are leveraging this by embarking on mergers and acquisitions abroad. We want a piece of this cross-border M&A action,” K V Kamath, chief of ICICI Bank, earlier told DNA Money.
According to industry officials, ICICI played a role in financing, underwriting and structuring 70% of Indian company-led global M&A deals estimated at roughly $35 billion in 2007.
Wall Street insiders expect even greater M&A activity in 2008 emanating from India.
“We have seen some very heavy hitters in India who have been able to leverage off their strong domestic position to make acquisitions in the United States and Europe. The bargain-basement prices in the US are plum for M&A deals,” said Amit Bhatiani, portfolio manager in hedge fund Duma Capital in New York.
