FDs brace for emerging markets onslaught

KPMG research, however, indicates that local finance heads could soon be
fending off takeover attempts from emerging markets rather than pursuing them.

In a study tracking merger and acquisition activity in emerging markets, KPMG
found that four years ago the number of deals into emerging markets outnumbered
transactions coming the other way by four to one. In the first half of 2007 that
ratio has shortened to less than two to one.

During the first six months of 2007, there were 67 emerging-into-developed
deals taking place, against 126 developed-into-emerging transactions, prompting
thoughts that emerging market businesses will soon become more active than their
western counterparts.

‘Looking at current trends, it’s feasible that this crossover could happen
within the next two to three years… the hunted are fast becoming the hunters,’
said Ian Gomes, KPMG’s UK chairman of new and emerging markets.

India was the most prolific outbound acquirer, closing 32 such deals during
the six months to June 2007. Chinese businesses made 14 acquisitions into
developed markets, up on the eight deals closed during the last six months of
2006, while Russian companies completed 11 international deals in the first half
of 2007.

But why are companies in emerging markets so keen to buy into developed
markets, when the real growth in the world economy is taking place on their
doorsteps?

Alka Bali, a director at investment bank Close Brothers who has strong
expertise in the Indian market, said there was growing confidence within
emerging market companies in their ability to close deals abroad.

‘A key influence is not only the growing ability of Indian corporates to
finance these deals, but their increasing confidence,’ Bali said.

Ian Coleman, head of emerging markets at PricewaterhouseCoopers, said
emerging market companies were now more aware of opportunities in developed
markets.

‘There are a lot of companies looking to move into more developed markets
where they can exploit their low-cost production capabilities and brandings,’
Coleman said.

COMPANY REPORTS

Toy company restates income tax

Errors uncovered in how Toys ‘R’ Us recorded its income taxes, has forced the
retailer to restate its first three quarters’ numbers of 2006. In a regulatory
filing with the SEC, Toys ‘R’ Us said it had restated net sales and expenses to
reflect increases of $19m (£9.5m) and $35m for the quarter and fiscal year
ending 29 July respectively.

SEC charges former Nortel execs

The SEC has charged four former finance executives at Nortel Networks Corp
with engaging in accounting fraud. Those charged are Douglas Hamilton, Craig
Johnson, James Kinney and Kenneth Taylor, who served as vice presidents of
finance for Nortel’s Optical, Wireline, Wireless and Enterprise business units,
respectively.

It brings the number of senior executives charged to seven Ð in 2003 the US
watchdog charged Nortel’s former chief executive, chief financial officer and
controller with directing the earnings management fraud that manipulated the
Toronto-based company’s reserves.

Nortel made no comment on proceedings against former company officers, but
said it will continue to co-operate fully with the SEC.

KPMG called in at mortgage lender

Administrators from KPMG have been called in following the collapse of
wholesale lender Victoria Mortgage Funding. The appointment was announced by
regulator the Financial Services Authority, after the group was placed in
administration. Christine Laverty and Michael McLoughlin of KPMG have been
appointed as joint administrators of the lender. Up to 381 customers, who have
current mortgage offers, may be affected.

Battle for talent hurting finance functions

The battle to find, recruit and retain talented individuals is hurting
corporates’ finance functions, according to new research from Deloitte. The firm
found there was a deep gulf between the goal of the finance department and the
talent it had to achieve that goal.

A worldwide survey of senior financial executives, conducted by Deloitte with
the Economist Intelligence Unit, found that efforts to attract, keep and develop
high performers was not a chief priority. Worryingly, only one third of CFOs
surveyed had a recruitment strategy.

German groups should have more tax audits

Companies in Germany should be subject to more frequent corporate tax audits,
rather than the country undergo tax law reform, the CFO of insurance giant
Allianz has said.

Helmut Perlet said such a move would mean the government could scrap plans to
reform the tax laws, according to an interview he gave to German financial
newspaper Handelsblatt. ‘It would then be unnecessary to tighten tax
legislation applicable to non-residents and determine new fraud positions time
and again,’ Perlet said.