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Economics & Finance - BLOG

Merger Control in the BRIC Countries vs. the EU and the US: The Facts

Karel Cool |

Written by Karel Cool, Nicolas Harlé and Philippe Ombregt With more than 90% of global GDP growth coming from the rapidly developing economies,[i] companies from around the world are targeting these markets for future expansion. The BRIC (Brazil-Russia-India-China) cluster has been a major magnet as it represents about 25% of global GDP and over 60% of global growth.

Acquisitions have frequently been chosen as a mode to enter or consolidate industries in the new high growth regions. While companies from the developed economies have been most active in pursuing acquisitions in the past, research by BCG (Figure 1) shows that the top 100 global challengers from the rapidly developing economies are catching up very quickly to their global peers.

 Figure 1: The average number of completed acquisitions, 2000-2009. Source: BCG

In the past five years, each of the BRIC countries has revised its merger control policies and practice, changing the conditions for competing in these markets.[ii]  In a series of three articles, we provide “the facts” about M&A activity in the BRIC countries; describe “how merger control works”; and summarize the “best practice” for clearing a merger or acquisition in these markets[iii].

The big picture

Figure 2 gives the total number of M&A transactions in 2001, 2005, 2008 and 2011 in the BRIC countries. It also shows growth rates in M&A transactions for the entire period and for sub-periods. The same data for the US and the EU provide a benchmark.[iv] The BRIC countries as a whole saw their total number of transactions increase from 2001 to 2011 from 346 to 7654, i.e. a growth rate of 2112%. For Europe and the US, the growth rate was 149% and 82% respectively, but from a much higher base of 6204 (EU) and 8531 (US) transactions in 2001. Of the BRIC countries, Russia had the highest percentage increase (3265%) while Brazil registered the lowest increase (511%).



Figure 2: Total M&A transactions in the BRIC countries, 2001-2011

While absolute numbers of transactions in the BRIC countries increased throughout the 2001-2011 period, growth rates were by far the strongest in the 2001-2005 period (582%). During 2008-2011, the growth rate slowed to 40%, roughly the same as the rate in the US.  Expressed in constant annual growth rate (CAGR), transactions growth in the BRIC countries was 62% in the 2001-2005 period, 32% in 2005-2008 and 12% in 2008-2011. During 2008-2011, the CAGR for EU and the US was 1% and 11% respectively.


 Figure 3: Share of the total number of M&A’s per BRIC country

Figure 3 shows the share of transactions of each of the BRIC countries in their total number. It clearly highlights the waxing importance of China to close to 50% of BRIC transactions, and the decreasing relative importance of Brazil and India. Russia became a clear second with 34% of all transactions by 2001.


Figure 4: Share of the total number of M&A’s in the BRIC, EU and US regions, 2001-2011

Figure 4 compares transactions in the BRIC region with the EU and the US. The BRIC region increased its share from 2% in 2001 to 11% in 2005, to 17% in 2008 and 20% of all transactions in 2011. The share of the EU region remained relatively constant at 40% while that of the US had a dramatic drop from 57% of all transactions in 2001 to 36% in 2008, to increase again to 40% in 2011. While Europe and the US remained the dominant zones for M&A transactions, the increasing importance of the BRIC zone, and from China and Russia in particular, is spectacular.

A view by sector

Figures 5 and 6 break down the M&A transaction numbers of Figure 1 by main sector and by country for 2008 and 2011.[v] The bottom two rows give the averages for the BRIC cluster and for the EU and the US together. The shading from dark blue to white depicts the size of the sector share of transactions per country from high to low.


Figure 5: Share of the number of M&A’s per sector for the BRIC countries, the EU and the US in 2008

For the BRIC countries, M&A’s in 2008 were concentrated in the sectors of consumer goods (23%), industrial goods (16%), financial services (15%), raw materials (12%) and IT (9%). By 2011, the same sectors still represented the bulk of the transactions (about 70%).


Figure 6: Share of the number of M&A’s in the BRIC countries, the EU and the US in 2011

Figures 5 and 6 show how China’s M&A sector profile deviates from the other BRIC countries. From 2008 to 2011, the share of transactions per sector did not change much for Russia, Brazil and India.  However, by 2011, China saw a sharp increase in transactions related to consumer goods and financial services, while transactions related to IT, industrial goods and raw materials receded in relative importance. Notable is that India maintained its relative lead among the BRIC countries in M&A’s related to IT – though in absolute amounts China had more than double the amount of IT related M&A transactions. Even in this sector, China’s dominance is apparent.

The sector averages for the BRIC and the EU-US clusters (bottom rows in Figures 5 and 6) show that merger activity is concentrated in the same sectors for all regions. Yet, transactions in the financial sector shot up dramatically in the US and Europe (from 15% to 26% of all transactions), while transactions related to industrial goods declined in relative importance. Very notable also are that transactions in the raw materials sector are fifty percent lower in the EU-US regions than in the BRIC group in 2008 and dropped even further in relative importance by 2011. The BRIC’s key role for role materials compared to the EU and the US is overwhelming.

Equally striking is the paucity of M&A activity in the healthcare, energy, telecom and utilities sectors in both the BRIC and EU-US regions.  As this is characteristic of all the regions, this most likely reflects the smaller number of available firms – and higher concentration – rather than national policy.

Merger control

One indicator of merger control is the number of transactions that are reviewed by the government authorities in each country compared to the number of M&A transactions.  As merger regulations have recently changed in the BRIC countries, and data on mandatory filing of the transactions with the authorities is incomplete and published with delay, we report in Figure 7 for 2008 data for Brazil, China, the EU and the US.  The most recent comparable data for all six countries is for 2010. Data for Russia is available only for 2010. India is just starting the reporting.


Figure 7: The number of completed M&A’s and the number of antitrust reviews in the BRIC, EU and US clusters

The higher number of reviews than the number of M&A transactions in Brazil and Russia is indicative of the high restrictiveness of antitrust and merger laws. Both countries have laws that frequently force companies which merge outside these countries (“foreign to foreign” transactions) to seek clearance if there might be an indirect effect on competition in these countries (e.g. effect on imports) or if their worldwide filing thresholds (worldwide assets or revenues) are met.[vi] Compared to Brazil and Russia, China had a benign regime in that regard: only 3% of transactions were reviewed in 2010. The comparable numbers for Europe and the US were 2% and 15% in 2010 (2% and 8% in 2008). China’s authorities clearly had a much more liberal approach to M&A’s in the past decade than Russia or Brazil. This most likely encouraged the acquisitive entry mode in China.

Figure 8 provides statistics on the share of reviewed cases that are cleared without conditions (“cleared”), cleared with conditions (“conditions”), and the number that was rejected (“# reject”). The first two are expressed as a percentage, the last in number of cases as outright rejections remain the exception across the regions. For the US, the significant number of rejected cases stands for “rejected transactions and abandoned or restructured cases” before or during Court proceedings. Contested mergers are often fought out in court, which may lead to an abandonment of the merger by either party.


Figure 8: The percentage of reviewed cases that are cleared without and with conditions, and the number of cases that are rejected

Figure 8 shows that Brazil clears the vast majority of cases without conditions (between 91% and 96%). While it has very stringent filing practices, Brazil’s merger authorities do not object to the vast amount of mergers – in the past, merger control was just an administrative filing. However, more recently, Brazil appears to follow the practice of the EU on imposing conditions on a significant number of mergers – 58 in 2008 and 27 in 2010 (between 4-9% of all reviewed transactions). The May 2012 enacted law gives more power to the anti-trust authorities, bringing new uncertainties to the M&A approval process.

While in Russia only 2% of transactions have restrictions imposed, the stringent filing threshold levels and the resulting huge number of required reviews lead to the imposition of restrictions on 83 cases, almost 4 times as many as in the US and Brazil, and 5 times as many as in Europe.  As the Russian Authorities do not systematically publish all their decisions and neither provide elaborate justifications for their decisions, possible biases and trends are not easily established.  However, the authorities appear very restrictive when mergers concern media, defense, banking and “national security” –  defined broadly.

Figures 7 and 8 show that China’s merger authorities appear to have been lenient in the past as not many cases were reviewed – 17 in 2008 and 117 in 2010.  Very significantly however, all mergers that were reviewed involved non-Chinese firms (“foreign-to-foreign”) and the one acquisition that was rejected involved a US firm (Coca Cola) buying a Chinese firm (Huiyuan Juice).[vii] As the number of transactions in China continues to increase and the merger control laws were recently made more stringent, there is a need to understand what will drive future acceptance, conditions and rejection in China.

Finally, India’s merger control has been dormant, but with the new antitrust laws that went into effect in 2011, 36 cases were already reviewed in 2011 and 2012.  While so far all cleared the reviews, the criteria that drive the review and acceptance decision need to be understood.


In the past decade, the number of mergers and acquisitions exploded in each of the BRIC countries, increasing more than twenty-fold between 2001 and 2011.  Compared to either the EU or the US, M&A transactions in the BRIC cluster as a whole were in 2011 about half the number of transactions. In 2001, the BRIC’s had only a twentieth of the M&A transactions of the EU and a twenty-fifth of the M&A transactions of the US.

The towering and increasing importance of China compared to India and Brazil is striking and the increasing position of Russia is also telling. By 2011, China and Russia together accounted for about 80% of all BRIC M&A transactions. Yet, since the GDP of China is about three times as large as the GDP of Brazil or India,[vii] a lower share of transactions for Brazil and India is to be expected. Considering that Russia’s GDP is about 20% lower than the GDP of Brazil and India[ix], the high merger activity in Russia is particularly striking.

Sector wise, M&A’s are concentrated in consumer goods, industrial goods, financial services, raw materials and IT. Compared to the EU and the US, the BRIC’s raw materials M&A’s stand out. China’s leading M&A position is also emerging in the IT sector, beyond India, if numbers of transactions are taken as a comparison basis.

Merger control was very different in the BRIC’s. Brazil and Russia had a very restrictive approach concerning filing requirements, hugely inflating their reviews compared to India and China.  While Russia frequently imposed conditions on mergers, in the past Brazil signed off on most transactions. However, Brazil’s new merger law enacted in May 2012 gives fresh powers to the antitrust authorities, which promises a more interventionist approach.

China adopted a very liberal merger control in the past but has recently put in place a review mechanism for M&A’s. The most recent numbers show that international firms get very close scrutiny. India’s merger control policy and practice is under construction.

As global companies from around the world use acquisitions to pursue global growth opportunities, they have to understand the regulation maze in the rapidly developing and developed economies and to know what it takes to complete the acquisitions.  In the next article “Merger Control and Practice in the BRIC Countries: How it works,” we will explain when and why a proposed M&A transaction requires filing with the authorities and what factors the BRIC authorities are sensitive to in their review and decision making.


[i] Source: BCG analysis of the BRIC countries plus Indonesia, Pakistan, Thailand, Philippines, Kazakhstan, Malaysia, Vietnam, Ukraine, Turkey, Mexico, Peru, Colombia, Egypt, South Africa, Iran, Nigeria, Algeria, Morocco, and Saudi Arabia.

[ii] Brazil: 2011; Russia: 2008; India: 2011; China: 2008

[iii] We would like to thank Joao Deca and Alex Kalenik, both INSEAD MBA 2012 and Yaroslav Kulick from Art De Lex Law Firm, Moscow for their research help.

[iv] Numbers are obtained from S&P Capital IQ and refer to the total number of completed M&A transactions. The data for Europe is for EU27.

[v] Row numbers do not add to 100 % as the sector information is not always provided by S&P Capital IQ.

[vi] Filing thresholds will be explained in the second article. See also

[vii] On the other hand, the 2012 Nestlé’s acquisition of the Chinese candy firm Hsu Fu Chi was cleared

[viii] Data for 2010 from the National Accounts Database, United Nations.

[ix] The GDP of Russia in 2010 was about 70% of the GDP of Brazil and 85% of the GDP of India according to the National Accounts Database of the United Nations


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