U.S.-based companies led the way in completing merger-and-acquisition (M&A) deals with emerging and high-growth market companies in the first half of 2011, nearly doubling the number of acquisitions made by the second-ranked country, according to KPMG International's latest Emerging Markets International Acquisition Tracker (EMIAT) study.

The KPMG study, which tracks completed deals in which an acquirer took at least a five percent shareholding interest, revealed that in the first half of 2011, U.S.-based companies completed 144 emerging and high-growth market acquisitions, up from 124 in the second half of 2010. Canadian companies made the second most acquisitions of emerging market companies with 82 in the first half of 2011.

In the first half of 2011, the most popular targets for U.S. companies wereChina(26),Brazil(25),Central AmericaandCaribbean(21),India(18), other South American countries (16), and South andEast Asia(16).

"U.S. corporate interest in emerging markets has continued to increase, as companies with strong balance sheets were prepared to pay for attractive opportunities," saidMark Barnes, principal-in-charge of KPMG LLP's U.S.-High Growth Markets practice. "The opposite investment flow, from emerging countries tothe United States, also increased. U.S. businesses may be seen as the most appealing targets because of the strength of their brands, technology and intellectual capital in a market that is tested and proven."

U.S. Companies Are Most Targeted by Emerging Market Countries

U.S. and Australian companies were the most popular investment targets for emerging and high-growth market companies, with 47 and 22 acquisitions made in each country in the first half of 2011, respectively. In the second half of 2010, there were 40 such acquisitions made inthe United States. The South andEast Asiacategory (14) andIndia(11) accounted for the majority of acquisitions made inthe United Statesin the first half of 2011.

Overall, emerging and high-growth market companies made 220 acquisitions in developed economies in the first half of 2011, down from 237 during the second half of 2010, according to the KPMG study. South andEast Asiawas the top acquirer in emerging-to-developed deals (E2D) with 54 acquisitions in the first half of 2011, followed byIndia(38) andChina(32).

"Uncertain economic conditions in many developed countries – particularly in the Eurozone – have slowed the volume of acquisitions made by emerging market companies," said Barnes. "While the short-term outlook is unclear, we expect the continued rise of the major emerging markets to fuel more acquisitions in developed economies over time, as there are deals to be had at discounted prices."

D2E Deals Remain Steady

According to the KPMG study, developed-to-emerging (D2E) deals increased slightly overall to 693 deals in the first half of 2011 versus 689 registered in the previous six-month period.

Followingthe United States(144) andCanada(82), theUnited Kingdom(62),Japan(61) and the other European countries category (61) made the most deals in emerging market economies.

The most popular emerging market targets for developed countries included South andEast Asia(129),China(91), other South American countries (83),Brazil(69), and Central andEastern Europe(67).

"Companies looking to expand into an emerging market often find that acquiring an established local company is a faster way to gain a foothold in a target emerging market," saidDan Tiemann, U.S. lead partner for KPMG LLP's Advisory Transactions and Restructuring group.

E2E Deals Fall

In the first half of 2011, there were 117 total emerging-to-emerging (E2E) deals, down from 144 in the previous six-month period. South andEast Asiawas the most popular target, registering 22 inbound deals, according to the KPMG study. Russia was the leading emerging market acquirer in other emerging markets with 22 deals.

Barnes noted, "The decrease in the number of acquisitions made by emerging market companies in other emerging markets is not surprising, given the fact that organic growth prospects are often so good within their home countries."