Review of M&A activity across APAC in 2019, examining the sectors and regions that propelled activity and assessing the trends that will inform dealmaking in 2020. APAC deal value fell from US$777.2bn in
2018 to US$651.5bn in 2019, a more than 16% decline. However, the annual total still represented a strong return from a deal the market that is now around twice as large as it was in 2009.
Sizable dips in the technology, media & telecom (TMT) (by 45%) and energy, mining, and oil & gas sectors (EMOG) (27%) were the factors most responsible for the drop in overall deal value. By comparison, the financial services, healthcare, and industrials, manufacturing & engineering (IME) industries all delivered robust results.
The latter was APAC’s largest sector by deal value, followed by TMT and financial services. Consumer and EMOG each accounted for around 10% of activity. North Asia, which includes the powerhouse economies of mainland China, Hong Kong, and South Korea, delivered the bulk of activity.
It's US$366bn worth of deals were more than quadruple the US$78.9bn recorded in second-place South East Asia, where high levels of real estate and financial services activity dominated. Japan, with US$ 74.1bn.
The worth of transactions rounded out the top three. South Asia and Australasia were US$67bn and US$64.1bn respectively.
The APAC M&A market’s relatively solid performance has come despite numerous impediments. China, its largest economy, has seen growth fall and encountered tightening domestic liquidity. According to Standard & Poor’s, Chinese corporate earnings growth has slowed and, with the state reluctant to provide stimulus, companies are retrenching and being disciplined about deal spending. Meanwhile, in Japan, low-interest rates and a flat economy have made it tough for businesses to generate organic growth.
US-China trade frictions have undercut activity across the region, with the International Monetary Fund has forecasted that the dispute would cut global growth in 2019 to its weakest level in a decade. Washington’s decision to withdraw from the Trans-Pacific Partnership likewise dampened APAC M&A activity.
There are signs that some of these headwinds may dissipate in 2020. China and the US have approved ‘phase one’ of a new trade arrangement. Although growth in China has slowed, its economy is still expanding at more than twice the rate of advanced economies in the West.
Japanese corporates are cash-rich and more comfortable pursuing cross-border deals. Many economists believe some southeast Asian countries are about to set out on a similar growth path as China did in
the early 2000s.
The coronavirus pandemic could offset some of the positives, but APAC’s long-term economic outlook remains broadly upbeat and supportive of further M&A growth.
Source: Mergermarket report.
This article was written by Desmond Chua Head of Region, APAC, Merrill DatasiteOne