Half of MLEs to grow through acquisition

 

Kuala Lumpur 25 April 2008 - According to the International Business Report, produced by Grant Thornton International, despite the turbulence in the world financial markets, 44 per cent of medium-to-large-enterprises (MLEs) globally are planning to grow through acquisition in the next three years and 23 per cent of those businesses anticipate a cross border deal.  MLEs see domestic and international Mergers & Acquisitions (M&A) as a key driver for growth. 

Dato’ N. K. Jasani, managing partner of Malaysian member firm said in a statement, the sub prime credit crunch in US will see more investors coming from Asian countries taking leadership position for investment in US and other regions that gives cheaper entry level and easy entry access. He said that companies across Asia will also be seeking out opportunities to expand on their strength through M&A activities. In the case of Malaysia, 36 % of companies responding intend to grow through acquisitions.

Dato’ Jasani said it will be a challenge for companies to look for lucrative ventures and long term prospects while clinching deals at relatively cheap prices. He pointed that while M&A may expand size and capabilities of corporate entities, it is always prudent to look at its economic benefits as bigger corporate entities may not benefit every corporation.

He emphasised that priority be given for entrepreneurship to flourish. Arising from M&As and emergence of larger business corporations, there will be economies of scale.

In this context, Dato’ Jasani said acquisition of overseas entities will give more economic benefits because these overseas acquisitions will create new markets and also new technology and branding opportunities. In the new economic scenario, he envisaged more Asian countries taking a lead role in M&A activities and direct investment overseas.

"Whilst MLEs may not be conducting headline grabbing deals that catch the public's interest, they are increasingly becoming more confident and successful in transacting internationally.  In particular, MLEs in the fast growing economies such as China and India see international M&A as an avenue for progressing up the value chain through the acquisition of brands and distribution channels in North America and Europe." 

Three factors are driving overseas acquisitions. Firstly, to be globally competitive and close to customers. Secondly, to maximise on their know-how and finally to take advantage of a relatively low valuations.
Dato’ Jasani elaborated that these are the very reasons Malaysian companies are expanding regionally in the plantations, mining, palm oil refineries and construction.

To finance growth, both by acquisition and organic, many MLEs are considering public listings. Malaysian respondents rank high, joint at second place with India with 37% while China heads the list at 60%. The high ranking on tapping public funds reflects the mature and sophisticated level of our Malaysian MLEs.

The survey reveals that business owners in the fast growing economies namely Brazil, Russia, India and China (BRIC) are now embracing M&A, with 59 per cent of businesses in BRIC countries reporting an anticipated acquisition in the next three years.  This supports the findings of the IBR business optimism survey which identified business owners from the emerging economies as the most optimistic in the world.

 

 

-Ends -