International mergers and acquisitions are forecast to decline by 56% in 2009 compared with 2008, the largest year-on-year decline since 1995 (see figure 1). This estimate is based on OECD analysis of data for international M&A activity up to 26 November 2009.
This fall is largely due to the 60% decline in value of cross-border merger and acquisitions (M&A) by firms based in the OECD area, from over USD 1 trillion in 2008 to USD 454 billion in 2009.
However, it was also due to the first sharp declines in M&A activity into and from major emerging economies: international M&A activity by firms based in Brazil, China, India, Indonesia, Russia, and South Africa fell by 62% to USD 46 billion in 2009 from USD 121 billion in 2008.
M&A activity into these countries is forecast to decline by almost 40% this year to just over USD 80 billion from just under USD 140 billlion in 2008.
Speaking at the opening of the OECD Global Forum on Investment in Paris, OECD Secretary-General Angel Gurría said that governments needed to do more to promote business investment. “Against the backdrop of a fragile global economy and sharp declines in international investment activity that have now spread to the emerging economies, the international investment policy community cannot afford to relax,” Mr Gurría said.
“Investment protectionism poses a grave risk to recovery by further reducing international investment flows just at a time when these are most needed. Global challenges also require investment on a scale that far exceeds available public resources. Business investment is an essential part of the solution,” he added. (Read his speech here)
These latest international investment estimates suggest that total foreign direct investment into the 30 OECD countries will fall to USD 600 billion in 2009 from a 2008 total of USD 1.02 trillion.