The value of international cross-border M&A activity rose by 47% from 1998 to 1999, up from $541 billion to a record high of $798 billion, according to a survey published  by KPMG Corporate Finance, the global investment banking adviser.

The KPMG Corporate Finance survey, the most comprehensive of its kind, represents data compiled worldwide from over 5,000 cross-border mergers, acquisitions and strategic investments announced during 1999. It shows a continuation of the record growth in M&A activity in Europe and North America and the gradual emergence of the Asia Pacific region from a period of recession and restructuring.

KPMG Corporate Finance found that Western Europe was the world’s leading region for cross-border M&A deals. In 1999 the region announced 73% by value ($582 billion compared to $327 billion in 1998) of the world’s cross-border deals, and attracted 45% of inward investment value.

The UK, fuelled by deals such as Vodafone-Airtouch and Zeneca-Astra, was the world’s most acquisitive country for cross-border M&A deals in 1999 accounting for $245 billion ($117 billion in 1998) or 30% of total value. The next most acquisitive nations were the US ($155 billion), Germany ($93 billion), France ($92 billion) and the Netherlands ($44 billion) during the year.

The US was the leading country for inward deals in 1999 attracting a total of $293 billion or 37% by total value, compared to $191 billion in 1998, with major deals including Voadafone-Airtouch and Scottish Power-Pacificorp. The UK featured in second place, attracting $123 billion ($86 billion in 1998) of inward investment followed by Sweden, $59 billion ($6 billion in 1998), Germany, $42 billion ($38 billion in 1998) and France, $35 billion ($24 billion in 1998.

Stephen Barrett, Vice Chairman at KPMG Corporate Finance, comments "The last year of the decade, and the Millennium, shattered previous records and we are witnessing an unprecedented rise in cross-border deal activity - now up by nearly 50%, in terms of value, on the previous year.

Yet again, centre stage attention is shared by Europe and North America (particularly the UK and US), in our view reinforcing the message that the transparent economies and developed capital markets of countries in these regions are proving a stronger platform from which to launch cross-border M&A deals."

During the year, the average value of a cross-border deal rose to $157 million, up nearly 50% on the equivalent figure of $106 million for 1998, illustrating the increasing power of larger corporates to close deals in the international M&A marketplace.

Barrett continues, "The message is clear; the larger and fitter corporates are stealing a march on their smaller competitors in closing transactions on the world stage. For many, buying power is based on high-stock values in a buoyant equity capital market - leaving many unquoted corporations with a real conundrum - how to finance a strategic acquisition."

The Asia-Pacific region attracted $56 billion ($52 billion in 1998) in corporate investment from cross-border M&A deals in 1999, against an outward investment of $33 billion, thereby becoming a net buyer of businesses on the international stage. The key buyers in the region were Japan ($20 billion), with Singapore and Hong Kong, both announcing $3billion each in cross-border acquisitions. The US led investment into the region with deals valued at $20bn, followed by the UK and France with $8 billion each.

Central and Eastern Europe remained out of favour for cross-border M&A deals in 1999, with inward investment rising from only $8 billion in 1998 to $12 billion in 1999. Poland was the most popular country in the region attracting $6 billion of this figure ($2 billion in 1998). Latin America fared slightly better attracting $39 billion, of inward investment during 1999 compared to $36 billion in 1998. Argentina was Latin America’s leading country for inward investment attracting $20 billion, compared to Brazil’s $9 billion.

Investment in global emerging markets (for example, China, Russia, India, Indonesia, Brazil) fell from $35.9 billion in 1998 to $21.6 billion in 1999, in part reflecting corporate investors’ concerns about political stability, corporate transparency and trading incentives in those countries.

Stephen Barrett observed, "Whilst Europe and North America are capturing headlines at present, our survey reveals a tangible, albeit understated, increase in deal activity in the Asia Pacific region. In the thick of the last decade the countries in this region were tackling the challenges of recession and restructuring. It is particularly pleasing to find, as the Millennium closed, countries such as Japan, Singapore and Hong Kong returning to the global M&A scene as both buyers and sellers. For the emerging markets, however, the picture remains bleak - investors continue to have real concerns about prudential investments in these countries."

In sector terms, the postal and telecomms industry was again the most active in the global M&A market, with deals worth $159 billion (20% of the world’s total) in 1999. The chemical industry was second, completing deals worth $93 billion. The extraction of mineral oil and natural gas ($75 billion), banking and finance ($59 billion) and the production and distribution of electricity, gas and other forms of energy ($42 billion) were the next most active sectors in 1999.

Stephen Barrett continues, "On the sectoral front it is no surprise to see communications dominating M&A activity. As markets consolidate, the consumers’ world becomes smaller and more tangible; thus communications equipment providers and media conglomerates have naturally led the charge in forging international mergers and acquisitions."

Over the past ten years cross-border M&A activity has risen fivefold, up from $159 billion in 1990 to $798 billion in 1999. The rise of the mega-deal is demonstrated by the dramatic increase in the average deal value, climbing from $29 million in 1990 to $157 million in 1999.

Cross-border M&A investment into the US has risen from $54 billion in 1990 to $293 billion in 1999, an increase of nearly 450%. US outward investment has risen from $22 billion to $154 billion, a 600% increase.

Western Europe has also seen a huge increase in inward investment, rising by 461% from $64 billion in 1990 to $359 billion in 1999. Investment overseas by Western European companies has increased from $97 billion to $582 billion, a 500% increase.

Investment into Latin America has risen from $8 billion to $39 billion, Asia-Pacific $16 billion to $56 billion and Eastern Europe $6 billion to $13 billion. Outward investment for Eastern Europe has risen from $0 to $330 million, Latin America $372 million to $3 billion. Asia Pacific has remained fairly constant throughout the decade, from $33 billion in 1990, peaking at $50 billion in 1997 and in 1999 back to $33 billion.

The top ten deals of the decade were all made in the last three years with Vodafone-Airtouch ($69.30 billion) eclipsing BP-Amoco ($61.00 billion) as the biggest deal.

The biggest sector involved in cross border M&A activity over the last ten years has, unsurprisingly, been postal services and telecommunications, accumulating $304 billion, followed by the extraction of mineral oil and natural gas sector with $254 billion, the chemical industry - $263 billion and banking and finance - $226 billion.

KPMG Corporate Finance
Stephen Barrett
+44 (0) 20 7311 8319 (work)
+44 (0) 802 610187 (mobile)

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