International joint ventures to increase says report
Dienstag, 17 November 2009
More than half of global companies plan to pursue joint ventures (JVs) in the next two years despite the number dropping this year by 75%, according to a survey carried out by accountancy firm KPMG.
Between 2005 and 2008, the largest increase in joint ventures was in the energy sector with the number of mining deals tripling as companies looked to take advantage of soaring commodity prices. Cross border joint ventures are most popular in Japan closely followed by China, then Germany and the UK.
Phil Abram, head of transaction services at KPMG in Leeds, said: “Joint ventures are built on trust and the huge drop in JV numbers this year shows just how much the collapse of Lehman destroyed trust in the market place.
"Recent high-profile JV announcements suggest trust is returning but, aside from this issue, companies also feel undervalued so are pursuing JVs rather than M&A to access the benefits of current synergies and future increased value.”
Mr Abram added that joint ventures were in some respects trickier than acquisitive transactions because there was a buy and a sell happening on both sides of the equation.
“Joint ventures were last popular in the early 90s when companies wanted to access low cost manufacturing bases in countries such as China and India, but global companies are now pursuing joint ventures to tap into the buying power of these markets,” he said.
"For companies in sectors such as energy and chemicals, joint ventures enable them to tap into the global resources essential to their growth.”
Meanwhile, another report by accountants Baker Tilly showed that interest from overseas organisations in UK firms is likely to drive a "considerable amount" of M&A activity across the region over the next six months.
Donnie Darroch, who works in the accountancy firm's Leeds office, said UK companies were catching the eye of international buyers and the trend was likely to continue as the value of Sterling remains at relatively low levels.
Mr Darroch said: “A large number of transactions that we are looking at are characterised by a large overseas buyer with a strong balance sheet.
"These businesses are taking advantage of the low value of Sterling and the lack of competition from UK firms who are still finding bank finance difficult to secure.
“We have been working closely with our network of international offices and are confident that we will complete a number of deals of this type over the next few months.”