UK: Value of Cross-Border M&A Deals At All Time High During Last Decade

Last Updated: 21 March 2000

KPMG Corporate Finance Millennium Survey Shows Value of Cross-Border M&A Deals At All Time High During Last Decade

Cross-border M&A activity has risen fivefold in the last decade, up from $159 billion in 1990 to $798 billion in 1999, according to KPMG Corporate Finance, the global investment banking adviser. The rise of the mega-deal is demonstrated by the dramatic increase in the average deal value, climbing from $29 million in 1990 to $157 million in 1999.

Following on from recently issued figures for 1999, the KPMG Corporate Finance survey, the most comprehensive of its kind, represents data compiled world-wide from over 50,000 cross-border mergers, acquisitions and strategic investments announced during the 1990s. It shows a continuation of the record growth in M&A activity in Europe and North America and the gradual emergence of the Asia Pacific region from a period of recession and restructuring.

Cross-border M&A investment into the US rose from $54 billion in 1990 to $293 billion in 1999, an increase of nearly 450%. In the same period US outward investment rose from $22 billion to $154 billion, a 600% increase.

Western Europe has also seen a huge increase in inward investment, rising by 461% from $64 billion in 1990 to $359 billion in 1999. Investment overseas by Western European companies has increased from $97 billion to $582 billion, a 500% increase.

Investment into Latin America has risen from $8 billion to $39 billion, Asia-Pacific $16 billion to $56 billion and Eastern Europe $6 billion to $13 billion. Outward investment for Eastern Europe has risen from $0 to $330 million, Latin America $372 million to $3 billion. Asia Pacific has remained fairly constant throughout the decade, from $33 billion in 1990, peaking at $50 billion in 1997 and in 1999 back to $33 billion.

Stephen Barrett, Vice Chairman at KPMG Corporate Finance, comments:

"Throughout the last decade, centre stage attention is shared by North America and Europe (particularly the US and UK). In our view, this reinforces the message that the transparent economies and developed capital markets of countries in these regions are proving a stronger platform from which to launch cross-border M&A deals.

"However, whilst these regions are capturing headlines at present, our survey reveals a tangible, albeit understated, increase in deal activity in the Asia Pacific region. In the thick of the last decade the countries in this region were tackling the challenges of recession and restructuring. It is particularly pleasing to find, as the decade closed, countries such as Japan, Singapore and Hong Kong returning to the global M&A scene as both buyers and sellers. For the emerging markets, however, the picture remains bleak - investors continue to have real concerns about prudential investments in these countries."

"The top ten cross-border deals of the decade were all made in the last three years with Vodafone-Airtouch ($69.30 billion) eclipsing BP-Amoco ($61.00 billion) as the biggest deal.

"The biggest sector involved in cross border M&A activity over the last ten years has, unsurprisingly, been postal services and telecommunications, accumulating $304 billion, followed by the extraction of mineral oil and natural gas sector with $254 billion, the chemical industry - $263 billion and banking and finance - $226 billion.

Stephen Barrett continues:

"On the sectoral front it is no surprise to see communications dominating M&A activity. As markets consolidate, the consumers' world becomes smaller and more tangible; thus communications equipment providers and media conglomerates have naturally led the charge in forging international mergers and acquisitions."

"The message is clear; the larger and fitter corporates are stealing a march on their smaller competitors in closing transactions on the world stage. For many, buying power is based on high-stock values in a buoyant equity capital market - leaving many unquoted corporations with a real conundrum - how to finance a strategic acquisition."

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

For further information, please speak to your usual KPMG contact.

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