M&A Maturity Index: Evidence from Seven Emerging Markets

Abstract

This paper develops a useful, robust, and reliable scoring methodology to determine a country’s capability to develop and sustain mergers and acquisitions (M&A) activity on the basis of publically available and continuously updated information. Due to the global economic downturn in 2008-2009, many Western companies are now looking to focus their business expansion in emerging markets where growth possibilities are perceived as better. The focus of this paper is therefore on emerging markets as illustrated by the seven countries selected as case studies (representing key emerging markets), however the scoring methodology could be applied to any country. This study analyses 31 factors in total which capture key legal, economic, financial, political, technological, and socio-cultural characteristics of countries. Each factor has been given a score of 1 to 5, where 1 represents fully open to M&A and 5 represents closed to M&A activity. The findings show an overall score of 2.70 for the seven countries compared to scores of 1.61 and 1.65 for the US and UK, respectively. The lower scores for the US and the UK signify the validity of the scoring methodology since these two countries are regarded as the most developed and open to M&A, and have the highest M&A activity. Interestingly, South Korea has the lowest score out of the seven selected case study countries (1.84), i.e., it is the country found to be best equipped to attract and sustain M&A, owing to the presence of a developed regulatory system, political stability, and high technical innovation. Russia has the worst score (3.26) mainly due to economic and political instability, making it a less attractive market.

Keywords: Country scores, Mergers and acquisitions, Emerging markets

JEL Classification: F21, G34, G38, K20, O11, O57