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By Marine Cole
The $2.2 billion acquisition of luxury department store Harrods by Qatar Holding brought back memories of pre-crisis times when sovereign wealth funds, especially from the Middle East, were driving many large deals.
But although this is the largest retail transaction of the year, it's only one of the very few deals by a sovereign wealth fund so far this year. The Harrods deal accounts for 58 percent of all sovereign-wealth fund acquisitions in 2010.
"With just over $3.8 billion in acquisitions so far in 2010, the volume of investments by global sovereign wealth funds is down 65 percent from the same period last year, marking the slowest start of the year for sovereign wealth activity since 2003," according to Thomson Reuters.
Although M&A activity by sovereign wealth funds is down overall, some specific countries like Qatar and China have been busy planning deals. Bloomberg reported Friday that Qatar Investment Authority plans to invest $5 billion in energy and property projects in Malaysia.
China Investment Corp., China's sovereign wealth fund, also announced Thursday it will invest $800 million in a Canadian energy venture, Penn West Energy Trust. With the deal, China will have a stake in the largest crude deposits outside Saudi Arabia.
"Asian buyers like China, Korea and India will be a major driver for mergers and acquisitions," Adam Waterous, global head of investment banking at Scotia Capital, told Bloomberg. The Chinese sovereign wealth said last year it had $110 billion for investments overseas.
It was a good week for Lazard, which closed on at least two transactions in which it advised targets: the Harrods deals as well as the acquisition of Australian toll-road operator Transurban Group by Canada's Investor Group for $7 billion.
But the largest acquisition of the week was the $7.3 billion purchase of Brasilcel by Spain's Telefonica, which also boosted emerging market activity in the telecom sector to 67 percent of the worldwide volume of telecom M&A.
This is the largest percentage of emerging markets' deal-making in any sector this year to date.
In the US, Germany's SAP acquired Sybase for $5.6 billion.
In the new equity issue market, the volume of convertible offerings is up 55 percent from the same period in 2009 led by activity in Europe.
Convertible issuance in the financial sector has especially grown totaling $11.8 billion so far this year, up seven fold from the record low in 2009 and about 40 percent of total convertible activity year to date.
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