ACCORDING to new OECD data,
international mergers and acquisitions are set to fall sharply in 2012 to USD
675 billion, down 34% on 2011 (USD 1 trillion). According to Michael Gestrin,
the report’s author, this decline is largely explained by uncertainty over
prospects for global economy and international business fears of rising
protectionism creating a riskier investment environment.
At the same time
as international mergers and acquisitions have been declining, firms have also
been increasingly divesting themselves of international assets, such as selling
foreign subsidiaries. As a result, net IM&A (the difference between IM&A
and international divestment) has dropped to $317 billion, its lowest level
since 2004. Outward IM&A by European companies is projected to fall the most
(-48%), followed by IM&A from Africa and the Middle East (-38%), and North
America and Asia (both -26%). IM&A by Latin American companies is on track
to increase by 130% on the back of big intra-regional deals in airlines, steel,
telecommunications, and retail.
In the past three years, net IM&A has
fallen to 48% of gross IM&A. This highlights the double impact of the
economic crisis on international investment flows. Not only do firms reduce
their international investments, they also become more prone to divesting
themselves of international assets.
International M&A by state-owned
enterprises (SOEs) has increased significantly in recent years. According to
Gestrin, this is likely due to cash-rich firms taking advantage of low prices
and strategic long-term investment by SOEs. In 2008 and 2009, IM&A by SOEs
almost tripled from $51 billion in 2007 to $139 billion in 2009. During this
period the share of IM&A by SOEs grew from 3% to a record 21% of the global
total. During the most recent declines, IM&A by SOEs has again started to
climb, projected to reach $72 billion this year, up from $60 billion last year.
s such, IM&A by government-owned entities is set to once again climb above
10% of the global total. China has dominated these rankings for the past three
years.
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