The US and Singapore ranked as “global M&A leaders”

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  • Asia and Gulf states on the rise
  • Eurozone woes hit traditional European M&A markets

London, Moscow, 27 July. The US and Singapore are the world’s most attractive markets in which to do M&A, according to new global country rankings. The US continues to be the top ranked country globally in terms of M&A maturity, closely followed by Singapore, as reported in the 2012 M&A Maturity Index. The UK follows in third position ahead of Hong Kong in fourth.

The annual Index, published by the M&A Research Center at Cass Business School in collaboration with EY, ranks 148 countries on their ability to attract both domestic and cross border M&A deals. The rankings are based on an analysis of a country’s regulatory, political, economic and financial environments, along with its technological capability, socio-economic characteristics, infrastructure and assets.

The high ranking of Singapore demonstrates the increased maturity of Asia as a global hub for transactions. According to the rankings, Asian countries now make up half of the top ten M&A locations for M&A with Singapore and Hong Kong joined by South Korea (5), China (9) and Japan (10).

Alexis Karklins-Marchay, Emerging Markets Center Leader at EY says:
“The lofty rankings of Singapore and Hong Kong are driven mainly by their highly-developed infrastructure, the availability of significant assets for purchase and the business-friendly regulatory environment. This differs to most of the other top 10 countries, which mainly owe their performance to strong levels of technological maturity, including high-tech exports and innovation in terms of patents filed, which demonstrates a highly skilled business community that can attract investment interest.”

Anna Faelten, Deputy Director of Cass’s M&A Research Center, says:
“The US continues to be the world’s foremost location for M&A, however it is clear that Asia as a region is on the rise. The fact that a country is highly ranked does not necessarily suggest that it currently has high values or volumes of M&A – these are not yet present for many emerging nations – but top rankings do suggest strong conditions for M&A to grow and thrive.”

Across the Index, a country’s technological developments and socio-economic characteristics were found to be the most important factors driving M&A volume, ahead of its economic and financial characteristics.

Gulf states on the rise 
With close to 40% of deals completed since 2009 taking place outside established US and European markets, the rankings also offer an intriguing glimpse into future M&A hotspots.

Among the rising stars is the UAE, which has leapt six places to 20th in the past five years, albeit falling by one position since the last update of the Index in 2011.

Alexis continues, “The UAE has benefited from developments in its financial infrastructure and economic growth which have helped to boost its score. While the UAE’s infrastructure and assets help to make its M&A market attractive, it is ranked lower in the technological categories that will be key to its future growth.”

Malaysia’s jump of seven places to 18th in the rankings over five years has been driven by significant improvements to its regulatory and political environments.

Other high-climbers over the five past years include Poland (up 5 places to 30), Romania (up 13 to 36), Turkey (up 7 to 37), India (up 5 to 38), Kazakhstan (up 6 to 40), and Morocco (up 8 to 47).

Eurozone volatility
Unsurprisingly, the rise of emerging markets has come at the expense of developed countries in Europe, where the economic problems affecting established M&A markets are reflected in the rankings changes. For example, Greece (53), unsurprisingly, has fallen 12 places since 2011 and 23 places in the past five years. Portugal (39) has slumped eight places since 2011.

Karklins-Marchay concludes: “M&A is an increasingly important tool for companies wishing to grow beyond their competitors. For many, this will involve examining new markets as the source of acquisitions. The challenges here are around familiarity with local risks and opportunities and investors would do well to understand these before embarking on transactions.

“The obvious challenge of doing deals outside a home country is to overcome unfamiliarity with the target nation. Beyond the specifics of the business that might be on the table, numerous wider issues exist. Without awareness of these factors, risks can be left unmitigated and opportunities overlooked.”

Alexei Ivanov, EY Partner: “While Kazakhstan, Ukraine and especially Russia continue to be important destinations for investors mulling over deals in Rapid-Growth Markets, it is also clear that with a notable exception of China and South Korea, Rapid-Growth Markets per se are still struggling in competition with economies that are treated as more mature. What is somewhat disheartening is that the CIS countries did not progress in M&A maturity index scores or rankings from the year before, with the survey giving them low scores on the traditional chiches such as political instability, corruption, enforcing rule of law and other factors.

However with other M&A fundamentals being rated quite highly, this gives a ground for optimism, particularly in the longer-term.”

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