M&A activity in recent years has soared, and most of the activity can be attributable to developed markets and interest in long-established sectors. However, certain emerging markets and upcoming sectors are making an increasingly significant contribution to global M&A activity. We delve into these trends, looking at which emerging countries and sectors are taking the lead.
Which emerging markets are active within M&A?
According to a Thomson Reuters report published in 2016, the total value of M&A activity in emerging markets during the first half of 2016 reached US$583.4 billion, an increase of 16.8% on the values seen during the same period in 2015. The report noted that deals involving Chinese companies drove this high figure, ultimately accounting for US$413 billion of the total figure. KPMG stated in 2016 that there was 25% rise in deals from emerging markets (E2E), and that once again Chinese E2E acquirers were particularly active.
Romania, another emerging market, has seen a particularly active few years of M&A. According to statistics provided by company deals database, Zephyr, M&A activity increased by 65% between 2013 to 2015. Recent high value transactions contributed to the most profitable combined deal values in the last six years, according to the Emerging Markets Information Service (EMIS). EMIS predicts that Romania will continue to be an attractive investment destination in the years to come, especially for private equity investors, within the manufacturing, financial, IT and real estate sectors.
Which upcoming sectors are active within M&A?
According to CNBC, one of the most important emerging sectors is the energy sector. Although the energy industry has been established as highly active for decades, the current global situation (the imminent loss of oil and the need to introduce more renewable energy sources) is set to bring great change to the sector. These new innovations are likely to make companies within the sector more valuable, and consequently, the new and emerging energy sector is likely to experience strong attraction from buyers within the M&A market. The sector has experienced a growth rate of 27% in M&A deal activity over the past eight years, according to Zephyr.
The Axial Forum notes that, although it has been a long-established sector, and one that we all contribute to, certain markets within the food and beverage industry can be classed as emerging. The trend of consumers increasingly choosing healthier products is stimulating a rise in M&A deals involving companies that manufacture nutritional food. KBS Corporate has witnessed this first hand; last year we advised on the notable sale of Natures Aid, a manufacturer of vitamins, minerals, food supplements and herbal products, to German pharmaceutical giant, STADA Arzneimittel.
This trend is even extending to the pet food manufacturing sector, according to The Axial Forum. Consumers are increasingly opting for healthy, organic and natural food options for their pets, and thus, companies that provide these products are emerging and becoming much more attractive in the M&A market.