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Acquisitions by emerging market family businesses set to rise

In the 1980s Japanese companies, buoyed by huge piles of cash and the strongest domestic economy in the world, bought a host of assets in the US and Europe.
 
One of the most memorable acquisitions was the purchase of the Rockefeller Centre in New York City in 1989 by a Japanese real estate company. At the time, the purchase was seen at just how much the centre of economic power had shifted away from the US towards Japan and Asia.
 
Ironically, the purchaser, Mitsubishi Estate Company, walked away from the $2 billion deal six years later incurring a huge paper loss.
 
Although the spree of acquisitions from Japan would collapse in the 1990s, the development was to mark the beginning of a trend that would see the growing influence of Asian and emerging market corporations in the global corporate scene.
 
Today, this trend has now entered a new phase with corporations from China and India, as well as Latin America making inroads into Western corporate culture through acquisitions – and much of this development is being led by family-controlled businesses.
 
Just how far this is developing was illustrated this week by the move of the Indian conglomerate Sahara India Pariwar to buy Metro-Goldwyn-Mayer, the famed Hollywood studio. The Indian billionaire Subrata Roy controls Sahara.
 
Acquisitions by family-controlled businesses from emerging markets include the Hinduja Group's purchase of the private banking subsidiary of the KBC Group, KBL European private bankers, earlier this year.
 
Although the Hinduja Group is based in London, it derives most of its revenues from businesses in India.

March 2010 saw the Ruia family-owned Essar Group announce it had purchased US-based Trinity Coal Partners for $600 million. The acquisition was part of the Indian conglomerate's plan to secure raw materials for its steel and power operations worldwide. It then went on to list on the London Stock Exchange, raising $1.8 billion in its IPO and entering the FTSE 100.

The news also that more emerging market companies were the targets of mergers and acquisitions in 2010 than European companies for the first time on record, according to Dealogic, indicates the growing power of emerging market corporations.
 
Family businesses in emerging markets will also tap Western capital markets to pave the way for greater corporate influence.

Although not a family controlled business in the strictest sense, the news this week that Severstal, the Russian steel company, is preparing to list its gold division in London this year is further indication of the growing power of emerging market corporations, many of them family controlled, on the world scene.

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