Cross-border merger and acquisition (M&A) activity increased significantly in the first half of 2015, but may be slowing down in the second half of the year, the latest UNCTAD Global Investment Trends Monitor reports.

The UNCTAD Global Investment Trends Monitor analyses the most recent trends in cross-border mergers and acquisitions (M&As) and assesses their prospects for 2015. It covers trends in developed, developing and transition economies.

A lull in South-South mega deals dampens cross-border M&A activity in developing and transition economies

The value of cross-border M&A activity, both in terms of purchases and sales, fell in developing and transition economies in the first half of 2015. Net purchases by MNEs from these economies fell 34%, compared with the same period of the previous year, to US$72 billion. The majority of this decline was due to a sharp reduction in the value of acquisitions in other developing and transition economies.

Developing Asia, which was the world’s largest investing region in 2014, registered the sharpest decline in net purchases in 2015. Nevertheless there was brisk activity by MNEs from a number of countries, including Singapore. Large deals included the purchase by a Singapore-based investor group of IndCor Properties Inc (United States) for $8.1 billion and United Fiber System Ltd’s (Singapore) acquisition of a 67% stake in Golden Energy Mines Tbk PT (Indonesia) for US$2.3 billion.

The value of net M&As carried out by MNEs from Latin America and the Caribbean fell sharply (-90%) in the first half of 2015. Their divestments rose to US$8.3 billion, largely as a result of Oi SA’s (Brazil) sales of its Portuguese assets to Altice SA (Luxembourg) for US$7.2 billion. African MNEs registered a similar decline, but the level of their sales was not sufficient to push them to net divestment. A slowdown in large deals carried out by the region’s MNEs contributed to the decline in net value.

MNEs from transition economies have slowed their purchases in 2015. Net purchases by MNEs from the Russian Federation fell 24% to US$866 million in the first six months of the year. These firms have been impacted by the rapid decline in commodity prices, in particular of crude oil, and reduced access to international financial markets.

Key finding of this issue:

• Cross-border merger and acquisition (M&A) activity increased significantly in the first half of 2015, but may be slowing down in the second half of the year. The value of cross-border M&A purchases, which is an indicator of outward FDI flows, rose to US$441 billion, a 136% increase over the same period of 2014.

• Multinational enterprises (MNEs) from developed countries were the principal drivers of the global cross-border M&A trend. European MNEs, after a number of years of high divestment levels, registered a sharp rise in the value of acquisitions in 2015.

• Cross-border M&As carried out by MNEs from North America continued to grow strongly (up more than 100%). Acquisitions by Canadian MNEs reached their highest half-year level. Tax inversions accounted for half of outbound deals by value from the United States, although they represented a small share (10%) of global cross-border M&A purchases.

• After emerging as the largest investing region in the world for the first time in 2014, cross-border M&As by firms from developing Asia registered a decline this year (-27%). Activity by MNEs from Latin America and the Caribbean, as well as from Africa also decreased, reflecting the consequences of depreciating domestic currencies and falling commodity prices.

• The growth of cross-border M&As purchases is projected to slow in the second half of 2015, but the full year value will be well above that of 2014, based on the first ten months of the year. While economic, financial, and structural trends support this forecast, potential downside factors could limit the scale and length of this current wave of cross-border M&As going forward.