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Maybe U.S. investment bankers are losing their touch.
For the first time since Thomson Reuters began keeping track in 1976, fewer merger and acquisition (M&A) deals were done in the United States in the first six weeks of 2010 than in emerging-markets.
During that stretch, emerging markets such as India, Mexico, Brazil and China accounted for 43% of global M&A volume with $91.2 billion worth of deals. That outpaced the United States, which completed roughly $55 billion in deals, accounting for a 29.5% share.
Surprisingly, Mexico alone did more volume, with 19.1% of the market versus Europe's 17.1% share.
U.S. M&A, which typically sets the pace for the rest of the planet, tumbled a whopping 41% from a year earlier and European deal activity plummeted 20% according The Wall Street Journal. Meanwhile, emerging-market deal volume raced ahead to the highest level since the first quarter of 2008, up 163%.
The biggest emerging-market deal was a stock swap valued at $27.5 billion, with America Movil SAB de C.V.'s (NYSE ADR: AMX) planned acquisition of Carso Global Telecom, a Mexico City telecommunications services provider. Other large deals included Heineken N.V.'s (OTC ADR: HINKY) pending $7.3 billion purchase of the beer business of Mexico's FEMSA (NYSE ADR: FMX) and Cosan SA Ltd.'s (NYSE ADR: CZZ) $5.2 billion acquisition of Shell International Petroleum's assets in Brazil.
But the white hot M&A activity in emerging markets compared to the U.S. isn't just about telephones and beer, or even oil. Simply put: many executives and bankers in the United States and Europe are unable to discern what lays ahead for western economies, putting a crimp in their appetite for expanding business through acquisitions.
Ken Jacobs, chief executive of investment-banking boutique Lazard, told The Journal in an interview that uncertainty is hindering deals.
"I don't think you are going to see a surge of activity until we get some clarity on valuation and that depends on your view of the economy," Jacobs said.
The picture is much clearer in the emerging markets, where economies such as Brazil, Latin America and China are still expanding. The corporate confidence that often accompanies such economic growth makes it easier for companies to agree on valuations and complete a deal.
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