Even in the difficult market, U.S. and U.K. companies remained the most active during the second half of 2008 in merger-and-acquisition deals with emerging and high-growth market companies, according to KPMG International's latest Emerging Markets International Acquisition Tracker study.

The U.S. and U.K. entities made the most deals and also were targeted most in cross-border M&A activity with emerging and high-growth market firms, according to the study, which tracks completed deals in which an acquirer took at least a 10 percent shareholding interest. In the second half of 2008, emerging and high-growth market companies made 24 U.S. acquisitions and 23 U.K. acquisitions, while U.S. and U.K. companies made 99 and 50 emerging and high-growth market acquisitions, respectively.

In the first half of 2008, companies in the United States and United Kingdom made 154 and 74 acquisitions, respectively, in emerging and high-growth market economies, while emerging and high-growth market companies made 39 acquisitions in the United States and 28 in the United Kingdom.

"Pockets of M&A activity remain, despite the anticipated steep decline in the number of deals between emerging and developed markets during the second half of 2008," said Mark Barnes, principal in charge of KPMG LLP's U.S.-High Growth Markets practice. "Confidence has waned since the credit crisis struck."

"In light of the economic environment, many companies are now switching focus back to their domestic markets, even though there are assets available at vastly reduced prices outside of their borders," he added. "Because of this, there may be a potential uptick in domestic deals, while cross-border deals may only be jumpstarted once liquidity starts to flow again."

The second half of 2008 saw a 28 percent decline in the number of emerging-to-developed (E2D) deals compared to a 37 percent decline in developed-to-emerging (D2E) deals, according to EMIAT figures. Only 107 E2D deals were registered in six months, the lowest total since the second half of 2006, and 230 D2E deals were recorded, the lowest figure since the beginning of 2003.

India remained the top high-growth market acquirer of companies in developed economies with 31 deals, more than doubling China, Hong Kong, and Russia's totals of 13 acquisitions each. India made nearly half of its acquisitions in the United States (12).

The United States made the majority of its high-growth market acquisitions in China (39), Brazil (17), and India (12).

Among other key survey findings:

- With Central & Eastern Europe newly introduced into the EMIAT, the region immediately established itself as the emerging market destination of choice (996 D2E deals over the past six years).

- In the second half of 2008, the leading emerging and high-growth market acquisition targets for companies from developed economies were Central and Eastern Europe (51), China (45), and Russia (33).

Barnes concluded: "Emerging and high-growth markets are obviously not immune to the credit crisis, but the fundamental characteristics that make these markets attractive - new potential customers, natural resources, skilled labor, etc. - still remain."