BRICs lead the way in M&A

Thursday, March 03, 2011 | Posted by: Fiona Cullinan
Categories: Brazil, China , Russia, India, Thought leadership | Tags: India, statistics, China, report, growth, M&A, survey, IBR, mergers, Brazil, funding, Russia, mergers and acquisitions, BRIC, acquisition, listing, Brazil, Russia, India, China, M&A, mergers and acquisition, IBR, statistics, acquisition, growth, report, survey, listing, funding

Nearly half (44%) of privately held businesses in the BRIC economies are planning to grow by acquisition in 2011, according to a new survey by Grant Thornton International. You can read the full report on M&A activity planned by Brazil, Russia, India and China below.

The figure of 44% is a big jump on last year when only 27% responded positively. Confidence levels over economic performance are higher in Latin America than any other part of the world, and these results reflect that.

The research, from Grant Thornton’s International Business Report (IBR) also highlights some of the key drivers in M&A deals. For those PHBs inclined to make acquisitions, 66% say that one of the key drivers behind growth plans is the desire to build scale; accessing new markets also rated highly (66%).

For the BRIC economies, the acquisition of new technology or established brands was almost as important, with 63% identifying this as a driver for growth (up from 44% last year).

We’ve republished the BRIC regional focus report in full below. But for more regions or for an overview of global M&A activity, you can follow Grant Thornton’s International Business Report (IBR) for updates.

BRIC M&A in focus
PHBs in Brazil, Russia India and China are among the most acquisitive in the world, with on average 44% of them considering an acquisition, an increase of some 17% on last year. You can see the full breakdown by country and year in Figure 8 below.

Dongdong Liu, partner at Grant Thornton China, notes:

“While inbound investments are rising, the domestic market is also highly active. There is massive untapped potential for M&A in the Greater China region. Chinese companies are very confident and optimistic about their prospects and are serious about M&A”.

Acquisitive PHBs in the BRIC economies are driven principally by the desire to access new markets, build scale and acquire new technology or established brands.

Indian PHBs are among the keenest to make cross-border acquisitions, with as many as 40% expecting their acquisitions to be international. Indian companies are now well experienced in dealing with overseas M&A markets and are back on the acquisition trail after a lull following the financial crisis.

While many PHBs in the BRIC economies are focused on building value rather than looking to realise it at this stage, the 2011 survey shows there has been a noticeable increase in owners anticipating a change in ownership, with 14% considering a sale compared to 9% last year.

Mahad Narayanamoni, partner at Grant Thornton India, remarks:

“The challenge in India has long been a lack of willing sellers, although this is now changing as Indian businesses are increasingly open to change of ownership. This, coupled with international businesses recognising limited growth opportunities in their domestic market, is driving more inbound activity as buyers seek to establish or increase their foothold in India.”

Businesses in the BRIC economies also anticipate the need to raise capital to fund their growth: 16%, significantly above the global average, plan to finance growth through a public listing. Some 24% of mainland China firms mention this source, up from 11% last year, although fewer Indian PHBs said they are considering public listings in this year’s survey.

Mahad comments:

“I am somewhat surprised at this result, as the first half of 2011 is likely to be a good time for businesses to raise money through a public listing. Having said that, a number of high profile listings were postponed towards the end of 2010, which may well have dampened enthusiasm in the very short term and resulted in the cautious response. Also we are seeing an increasing number of businesses looking at private equity funding or private placements as a precursor to a public listing in early 2012.”

Grant Thornton corporate finance teams offer M&A, transaction services, valuations and capital markets advice in more than 60 countries. For further information, visit our Corporate Finance pages.

Alternatively, if you are a Chinese or Indian company looking to invest or list in the UK, for further information and contacts, visit our China Britain Service Group  or South Asia Group pages.

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