Analysis of developments in the fields of direct investment and M&A (mergers and acquisitions) – Part I

Sector: Finance | Financial markets and Institutions
Client: EC DG Internal Market and Services
Published: November, 2011
Document type: Report 
Tagged: analysis of economic developments EC/EEA quantitative analysis

This report provides a comprehensive analysis of developments in the fields of direct investment and M&A in 2010-11. This includes a descriptive analysis of inward and outward FDI stocks and flows (including FDI resulting from M&A activity) within the EU and between the EU and third countries, by sector, type of FDI, etc.

Major factors driving both FDI flows and international capital flows in 2010 were a) the differences in growth performance between the advanced economies and the emerging and developing economies, b) the continued rapid growth in commodity prices  which accentuated current account imbalances, c) the continued hesitancy of non‐ financial business to invest in structures and equipments and undertake any M&A activity and d) the continued deleveraging and balance sheet restructuring by financial institutions.

Overall, the level of FDI flows and international capital flows recovered slightly in 2010. Looking ahead, UNCTAD expects FDI to recover to pre‐crisis levels within 2 years. However, both UNCTAD and the OECD note that many factors could derail this fragile recovery including tightened fiscal policy, fluctuations of commodity prices, regional political instability and uncertainty over sovereign debt.