M&A continues to be the fastest and most effective way for companies to gain a foothold and build scale in new market areas, both domestically and internationally. So it is encouraging that companies throughout the world have begun to refocus their attention on cross-border M&A as a method of expansion.
According to the recently released 2013 Grant Thornton International Business Report, although 84% of businesses surveyed plan on growing their business through domestic acquisitions, the expectation is that there will be an “increased appetite” of companies for cross-border M&A over the next few years.
The Global Rise in Cross-Border M&A
An examination of the history of global M&A activity shows that cross-border M&A increased by 18% in 2012, and has grown by 56% since 2008. Grant Thornton, an international tax and advisory firm, sees the trend towards increasing cross-border transactions as not being primarily fueled by large organizations. Instead, businesses of all sizes are looking internationally to acquire businesses or for potential purchasers of their businesses.
The results of the survey shows that 39% of US companies and 28% of Brazilian companies expect that cross-border M&A will be responsible for their acquisitive growth. Only 3 years have passed since the 2010 global financial downturn and the global average of companies planning to grow through international acquisition is now an impressive 39%.
The following is a country by country breakdown of the percentage of companies that expect their acquisitive growth to be cross-border:
Argentina – 23%
Australia – 31%
Brazil – 28%
Canada – 30%
China (Mainland) – 47%
France – 32%
Germany – 46%
India – 46%
Ireland – 51%
Italy – 39%
Japan – 18%
Peru – 61%
Russia – 13%
Singapore – 86%
South Africa – 42%
Spain – 61%
Sweden – 25%
The Netherlands – 57%
United Arab Emirates – 66%
United Kingdom – 31%
United States – 39%
Private Equity Is Expected to Fund Brazil’s Growth
Governments throughout the world have recognized the increasing importance of attracting foreign investment. As a result, they are pursuing policy initiatives designed to ease barriers to private equity investment.
The advancement of private equity investment has reached Brazil due to the increasing number of private equity firms with a presence in South America. Grant Thornton reports that 47% of Brazilian companies expect to raise private equity funds to finance their growth strategies. This move toward private equity financing has had the effect of decreasing the percentage of companies that plan on relying on traditional bank financing.
For well-managed and well-funded companies seeking to access new markets, it is clear that the importance of cross-border M&A as a growth strategy will increase.
