UK: Western Europe Takes Leadership Role in Global M&A According to KPMG Corporate Finance

Global cross-border M&A activity continued its meteoric ascent, in the first six months of 2000, with worldwide deal values climbing by 60% to $643 billion ($403 billion between Jan-June 1999). During this period, Western European buyers established a leadership role in global M&A activity, spending $492 billion on cross-border deals (76% of the total).

The UK emerged as the world’s single biggest buyer, following the $186 billion Vodafone-Mannesmann deal, accounting for a 29% share of the total value of cross-border mergers and acquisitions.

The KPMG Corporate Finance survey, the most comprehensive of its kind, represents data compiled worldwide from over 3,300 cross-border mergers, acquisitions and strategic investments announced January to June 2000.

Stephen Barrett, Vice Chairman at KPMG Corporate Finance, said "These first half statistics reveal a storming performance in global cross-border M&A activity. For the sixth year in succession, the aggregate value of deals has risen. Clearly, mega-deals, such as the $186 billion Vodafone-Mannesmann deal between the UK and Germany, impact the statistics, but even if that deal were excluded from consideration we have an upwards value trend."

Barrett continued: "One striking reading on the instruments is that the number of deals, not just their value, is rising. In the six months to June we plotted 3,310 cross-border deals: up 20% on the comparable figure for 1999 - and suggesting the reversal of a three year gradual decline in underlying activity. Even though major corporations are grabbing the headlines, the statistics do suggest smaller businesses are back in the M&A chase."

As stated above, Western Europe was the world’s leading region for cross-border M&A deals in the six months to June 2000, recording 76% by value of the world’s cross-border deals, and attracting 65% of inward investment value.

"Germany, fuelled by the Vodafone-Mannesmann deal, was the leading country for inward investment, attracting $209 billion or 32% by total value, compared to $43 billion in 1999. The US featured in second place attracting $133 billion ($167 billion in comparable period) of inward investment followed by the UK ($118 billion), Canada ($33 billion) and France ($19 billion)" Barrett added.

Inward investment into both the UK and France fell slightly compared to the previous six months (Jul-Dec 1999), whereas the value of German and US inward investment increased. However, in terms of the number of inward deals, there were increases for the UK and France as well as Germany and the US. Trends, over the last few years, in the number of inward deals are broadly similar for Germany, France and the UK.

Comparing six months to June with the previous half-year period, investment into the US rose by 4% from $128 billion (Jul-Dec 1999) to $133 billion. US outward investment rose from $71 billion (Jul-Dec 1999) to $95 billion, a 34% increase.

"During the six months, the average value of a cross-border deal rose to $194 million, 27% up on the 1999 full year figure of $153 million, illustrating the increasing power of larger corporates to close deals in the international M&A marketplace" he said.

The Asia-Pacific region attracted $34 billion ($63 billion in 1999) in corporate investment from cross-border M&A deals in Jan-June 2000, against an outward investment of $22 billion. The key buyers in the region were Japan ($8 billion), Australia ($6 billion) and Singapore ($4 billion). The US led investment into the region with deals valued at $10 billion, followed by the UK ($6 billion), Australia ($4 billion) and Norway and Germany (both $3 billion).

Inward investment into Central and Eastern Europe fell from $7 billion in the first half of 1999 to $5 billion in the second half of last year and to $3 billion in the latest six-month period. Despite the falling value of inward cross-border investment, this region has had an increase in the number of inward deals.

Western Europe has seen a huge increase in inward investment, more than doubling from $211 billion in July to December 1999 to $420 billion in January to June 2000. Investment overseas by Western European companies rose from $298 billion (Jul - Dec 1999) to $492 billion for the six months to June 2000, a 65% increase. Much of this increase can be attributed to the Vodafone-Mannesamnn deal, however, the region also saw an increase both in the number of disposals and the number of acquisitions.

Latin America attracted $19 billion of inward investment during the six month period compared to $45 billion in 1999. Brazil was the region’s leading country for inward investment, attracting $8 billion compared to $18 billion invested in Argentina during 1999.

There were also large increases in investment in global emerging markets such as Russia, India and Indonesia compared to either half of last year.

Stephen Barrett observed, "In sector terms, the telecommunications industry was again the most active in the global M&A market, with deals worth $265 billion (41% of the world’s total) in the six month period". The business services industry was second, completing deals worth $98 billion. The banking and finance ($54 billion), electricity and gas ($38 billion) and recreational and cultural services ($23 billion) were the next most active sectors in the six months to June 2000.