International mergers and acquisitions plunge in Asia

International mergers and acquisitions plunge in Asia

LONDON (Reuters): Mergers and acquisitions by international companies in Asia has fallen dramatically due to the continuing financial crisis in the region, according to a survey released by advisory group KPMG Corporate Finance today.

KPMG said that while the total value of worldwide cross-border mergers and acquisitions during the first half of 1998 reached a record US$220.61 billion, investment in China, India, Hong Kong, Indonesia and the Philippines fell.

China -- which had been the most popular target for international corporate buyers -- saw inward corporate investment fall to $2.53 billion in the first half of 1998, down from $6.57 billion in the same period a year earlier.

India saw the level fall to $209 million from $1.26 billion a year earlier, Hong Kong marked a dramatic slump to $642 million from $5.0 billion and Indonesia saw inward corporate investment decline to $1.01 billion compared with $2.19 billion.

The Philippines virtually saw corporate deals dry up from the $2.37 billion achieved in the first half of 1997.

Still in Asia, but at the opposite end of the spectrum, Japan and South Korea both benefited from freer access to domestic firms, with Japanese businesses involved in foreign acquisitions and joint ventures worth $5.33 billion, up from $113 million during the same period in 1997.

South Korea saw deals struck by international firms soar to $3.36 billion from $260 million a year earlier.

But emerging markets such as Latin America and central and eastern Europe suffered during the first half of the year, with foreign acquisitions in Argentina almost halved to $1.89 billion while in Mexico the level fell to $623 million from $3.22 billion during the period.

Chile, Peru, Venezuela and Colombia all saw sharp falls, although Brazil managed to hold its own with inward deals falling only marginally to $4.25 billion from $4.36 billion.

Central and eastern Europe was hit by nervousness about the region's financial and political stability, KPMG said, with a significant fall-off in oil-related deals in Kazakhastan.

Cross-border deals in Poland dropped to $623 million from $1.27 billion, but overseas acquisitions in Russia rose to $1.23 billion from $1.10 billion.

In western Europe, where the level of deals is expected to rise as the single currency combines with sustainable growth prospects to offer further opportunities for overseas firms, Britain remains the most popular target and the level of bids reached new highs during the first half of 1998.

KPMG found acquisitions of British businesses by foreign companies more than tripled over the same period in 1997 and reached a new peak of $47.63 billion compared with $12.3 billion in the first half of 1997.

It was also significantly higher than the $43.1 billion of deals in the second half of 1997 -- the previous record.

"Opting out of the first wave of EMU seems to have done nothing to stem the buying spree in the UK, with both the value and volume of foreign takeovers reaching a new high in the first half," said KPMG's Stephen Barrett in a statement.