US-based companies were the most active in completing mergers and acquisitions with emerging and high-growth market companies in the first half of 2012, but deal activity dropped by 33 per cent compared with the first half of 2011, according to KPMG International's latest Emerging Markets International Acquisition Tracker study.

The semi-annual KPMG study, which tracks completed deals in which an acquirer took at least a five per cent shareholding interest, found that US-based companies completed 108 emerging and high-growth market acquisitions in the first half of 2012, down from 160 in the first half of 2011.

This drop in acquisitions made by US companies coincides with a worldwide slowdown in developed-to-high-growth (D2H) market deals, which dropped 15 per cent - 661 in the first half of 2012 versus 778 in the first half of 2011. Companies in the "other European countries" category made the second-most acquisitions of emerging market companies with 81 in the first half of 2012.

The most popular geographic targets for US companies in 2012 were Brazil (25), Central America and the Caribbean (15), and South and East Asia (14).  South and East Asia (122) and Brazil (81) were the most popular targets for D2H deals overall.

"The M&A slowdown is impacting mature and high-growth markets alike," says Mark Barnes, principal-in-charge of KPMG's US high-growth markets practice. "But there are pockets of bright spots, as we see China a leading buyer of companies in developed economies, Brazil a top destination for acquisitions by companies in developed economies, and US companies still acquiring companies in high-growth markets although deal volume is down."

US companies were the most popular investment targets for emerging and high-growth market companies in the first half of 2012 with 47 acquisitions made in the country, more than doubling the number of deals made by companies in the other European countries category (23). South and East Asia (16), China (7), and Central America and the Caribbean (7) accounted for the majority of acquisitions made in the US in the first half of 2012.

The US also was the most targeted country in the second half of 2011 with 49 acquisitions made by emerging and high-growth market companies.

Overall, emerging and high-growth market companies made 203 acquisitions in developed economies in the first half of 2012, down from 219 during the first half of 2011, according to the KPMG study.  South and East Asia (41) and China (39) were the top acquirers in high-growth-to-developed deals (H2D) in the first half of 2012.

"Potential US-based acquirers are sitting on a lot of cash, which could cause a brighter second half, but, at this point, they are being very careful about how they deploy it," says Dan Tiemann, partner and US leader of KPMG's transactions and restructuring practice.

In the first half of 2012, there were 115 total high-growth-to-high-growth deals, down from 166 in the first half of 2011. Central and Eastern Europe was the most popular regional target, registering 21 inbound deals, according to the KPMG study. Russia was the leading emerging market acquirer in other emerging markets with 23 deals.

"While deals between companies in high-growth markets are down, these companies are still seeing opportunities in developed economies," says Barnes. "In some cases, the Eurozone crisis and low asset values in the US have encouraged countries which are not traditionally seen as acquirers, such as Indonesia and Thailand, to make deals.

"Due to uncertain economic conditions, some companies in developed economies are holding off on making acquisitions in high-growth markets. But we see pent-up demand as many of these high-growth markets are still attractive and have proved to be self-sustaining due to domestic consumption and growing middle class, which could signal an increase in acquisitions of high-growth market companies when economic conditions improve."