Privately held cos to grow through M&As

Despite the current turbulence in the world financial markets, 44% of privately held businesses (PHBs) globally are planning to grow through acquisitions in the next three years and 23% of those businesses anticipate a cross border deal. PHBs see domestic and international M&As as key strategic tools to drive growth, according to the International Business Report produced by Grant Thornton International.

The survey reveals that business owners in the fast growing BRIC (Brazil, Russia, India and China) economies are now embracing M&As, with 59% of businesses in BRIC countries reporting an anticipated acquisition in the next three years, while 48% of respondents across North America anticipate growing through acquisition over the next three years.

Says Pankaj Karna, M&A partner, Grant Thornton India, ?Whilst PHBs 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, PHBs in the fast growing economies such as mainland China and India see international M&A as one of the means of progressing up the value chain through the acquisition of brands and distribution channels in North America and Europe.?

The report further reveals that PHBs in the BRIC economies are focused on building value rather than looking to realise it at this stage and are excited about following their own growth strategies through domestic and cross-border acquisitions.

In China, vast amounts of once state-controlled industry is driving domestic deal flow in the private sector. Also Chinese M&A activity is being fuelled by finance available from the equity markets. In India, reforms since the 1990s have unlocked India’s economic potential and positioned the country as one of the fastest growing economies in the world.

India has a young, educated and ambitious labour force. Growth is accelerating, boosted by dynamic, knowledge-based service sector and expanding manufacturing sector.

With balance sheet gearing among many PHBs relatively modest by historic standards, mid-market transactions which deliver earnings and growth prospects will always present attractive market opportunities for funders.

For many shrewd, asset-rich trade buyers, 2008 should offer an opportunity to undertake strategic acquisitions at realistic valuations, the report adds.