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The rise of the cross border transaction - Assessing M&A maturity - EY - Global

The serial transactor advantage Which market? Assessing M&A maturity

M&A maturity rankings (Top 10, leading "less mature" market countries and BRICs)

M&A maturity average scores by region (weighted by GDP of constituent countries)

A good understanding of the nuances of each market can help reduce risks and improve opportunities.

Our work with Cass Business School on M&A Maturity analyses 36 publicly available factors to quantify the level of maturity around six issues: economic, financial, political, regulatory, sociocultural and technological.

It is perhaps no surprise that the most mature markets are also those that have traditionally played the biggest part in M&A transactions. The United States and the United Kingdom top the maturity rankings, beaten only by another established economy: Canada.

The remainder of the top 10 on the M&A maturity index are industrialized nations — Japan and Western and Northern European countries. Strong ratings for technological and sociocultural factors play their parts in pushing these countries to the upper echelons of the tables.

M&A maturity rankings (Top 10, leading "less mature" market countries and BRICs)

What is, however, potentially surprising is the lofty position of other nations, often described as less mature, recently matured, or even emerging. Israel, Chile, the Czech Republic and Malaysia all appear in the early twenties of the rankings.
These nations are boosted by rather distinct factors. Israel scores best in technological factors, Chile in the political arena, Czech in sociocultural and Malaysia in economic factors. These states lead the BRIC countries that are typically mentioned in analysis concerning major emerging markets.

Maturity rankings: BRIC
Of the BRICs, China perhaps surprisingly tops Brazil, India and Russia in the M&A maturity rankings. Technological maturity has contributed strongly to the success of China, while regulatory and political issues have impinged on its progress. Brazil also shows strength in technology but is again held back by the same factors.

Russia offers a similar profile, with a strong performance in the sociocultural arena, but an even weaker political score. And in India, good performances in financial and technological arenas are hit not only by regulatory and political concerns, but by sociocultural issues as well.

The exact causes of the success of countries such as Malaysia and Israel and difficulties seen in the BRICs requires a closer look into detailed sub-factors. When analyzing these scores, it should not be forgotten that while a high score suggests maturity and ease of transacting (and commensurate higher pricing), a low score offers challenges that, when overcome, may offer significant value opportunities for forward thinking serial transactors.

Regional Trends
Such risks and opportunities are not necessarily unique to one country, these may be present in several or pervade an entire region. As the graph below shows, the overall level of maturity varies between regions.

M&A maturity average scores by region (weighted by GDP of constituent countries)

While there are outliers in each geographical group, a definite trend emerges from the regional average. As mentioned above, Western markets lead on maturity, but perhaps surprisingly, Asia performs most strongly among less developed regional groupings.

The challenge of understanding regional trends and local variations is a testing one. But a good understanding of the nuances of each market can help reduce risks and improve opportunities when contemplating a series of acquisitions. Picking the right country in which to invest may yield growth opportunities that help win the competition for growth – serial transactors have learnt how to do this.

See www.mandamaturity.com for more detailed analysis of all 175 countries and contact details for professionals who can help you turn our insight into a serial transactor advantage.

 


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