Foreign buyers beware
Emerging markets companies buying western assets must heed the lessons of Cemex and Tata Motors.
The hunt for western assets continues apace for emerging market companies. Last month, China Petrochemical Corporation (Sinopec) announced its intention to buy Swiss rival Addax for $7.2 billion.
If the Sinopec deal is included, the total value of announced emerging markets’ acquisitions of western targets up to the end of June is $52.5 billion, according to Dealogic. Although the final value for this year is unlikely to match the $153.7 billion of 2008, it is on course to match, if not beat, the $104.8 billion of 2006.
These numbers suggest that emerging markets companies’ aggression has not been cooled by the financial crisis. State-owned entities are leading the way but bankers say that private-sector corporates will follow once markets stabilize, especially out of Asia where balance sheets are less strained. They are likely to focus their attention especially on Europe. Much of the activity is in natural resources, although it has moved on to encompass the finance, pharmaceuticals and technology industries.
Potential buyers should, however, heed the lessons of Cemex and Tata Motors. Mexican cement firm Cemex bought companies in the US, the UK and Australia. It was perceived as a great role model for other emerging-market acquirers, not least for its ability to integrate culturally diverse assets.