Sunday, March 7, 2010

Mergers and acquisitions in emerging markets

History may judge the sub-prime crisis and the Great Recession as a turning point in the global economic balance of power, decisively signalling the arrival of emerging economies as equal, if not (atleast for sometime ahead) dominant, contributors to world economic growth. Another indicator of this trend is the rapidly increasing share of emerging economies in global mergers and acquisitions. Of the $395 billion in deals announced this year through March 3, $135 billion (34%) had a target or an acquirer (or both) in an emerging market, up from $97.6 billion (15%) of all deals through March 3, 2007.

This trend is a reflection of the massive cash reserves built-up by firms from the booming emerging economies and their ambitions to expand by capturing newer markets abroad. Companies from the developed economies - faced with the prospect of weak demand at home, aging populations, and saturated domestic markets - seek to get a toe-hold into the rapidly growing emerging economies by striking up strategic partnerships and merging with local firms.

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