In 2011, international mergers and acquisitions (IM&A) had risen back up to just over $1 trillion. But according to the OECD’s Investment News, investment activity is projected to decline by as much as 36% in 2012, to $675 billion.
This drop has been accompanied by increased international divestment by firms. When this divestment is taken into account, the resulting net IM&A drops to $317 billion, the lowest level seen since 2004.
As the euro crisis drags on, Europe is expected to experience the largest drop in outward investment, a staggering 48%. Investments by Africa and the Middle East, North America and Asia are also expected to drop significantly. Latin America had seemed to be bucking the trend as intra-regional deals in airlines, steel, telecommunications and retail buoyed activity. However, IM&A into Latin America is set to fall by 30% in 2012.
The steep declines in IM&A reflect a deepening mistrust in the global state of affairs–from concerns that the US is heading for a “fiscal cliff” to slowing growth in China–that sees countries succumbing to a protectionist impulse in their trade and investment.
See also the OECD Investment News
©OECD Observer No 293 Q4 November 2012