No urge to merge

International mergers and acquisitions have registered a decline of 56% in 2009 over 2008, latest estimates show. This is the largest year-on-year decline in recent history. Much of this decline was due to the 60% plunge in M&A activity by firms based in the OECD area, from over $1 trillion to $454 billion. But major emerging economies, which enjoyed strong international investment performance in 2008, also suffered their first sharp declines in 2009 with respect to both outward and inward M&As.

Between 2007 and 2008, international M&A activity by firms based in Brazil, China, India, Indonesia, Russia, and South Africa increased by 30%, from $96 billion to $121 billion. Between 2008 and 2009, this activity fell by 62% to $46 billion. And while M&A activity into these countries increased by 5% between 2007 and 2008, it is forecast to have fallen by almost 40% in 2009.

Nor could the slight improvement in foreign direct investment in the second quarter, as reported by OECD countries, be sustained. Indeed, despite that slight uptick, inflows and outflows of FDI for the first half of 2009 were both down by over 40% over the first half of 2008.

The current trend supports the OECD’s forecast for sharp declines in both FDI inflows and outflows during 2009, with inflows likely to have tumbled to $600 billion and outflows to have dipped possibly below $1 trillion.

See also 

©OECD Observer No 276-277 December 2009-January 2010

Economic data


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