M&A deals between Asia Pacific companies hit decade high

Baron Laudermilk

Merger and acquisition (M&A) deals between Asia Pacific firms recorded strong growth for the first half of 2015 on the back of booming Asean economies, according to a recent EY study.

The APAC region recorded the highest deals by value in over a decade with US$561.8 billion, an increase of 55% when compared to the first half of 2014. This occurred despite a 9% decrease in deal volume to 5621 deals from 6,159 deals a year earlier.

Overall, technology industries within the Asia Pacific were leading in terms of both value and volume. This develops as frontier economies including Myanmar and Vietnam open up to international investments.

The second industry ranked in terms of deal volume was the professional services sector, seeing 522 deals worth US$19.9billion, followed by financial services that witnessed 368 deals worth US$46.6 billion. The majority of these transactions happened in investment firms and the banking sector, demonstrating that Asian markets are becoming more important to foreign and domestic banks growth strategies, as Europe’s economy continues to lag.

John Hope, Asia-Pacific transactional advisory services leader at EY writes, “following an incredibly strong 2014, the first half of 2015 continues to be very good for M&A globally. In Asia-Pacific, we are seeing an increase in deal value across almost all sectors. Companies, however, are not doing deals for deal’s sake. The decrease in the deal volume suggests a high level of discipline in selecting the right deals.”

Mainland Chinese companies led the region in terms of M&A value, recording 1,393 deals worth US$247.6 billion, showing an 88% year-on-year increase, and Japan was leading too with 1,500 deals worth US$79.4 billion. Other major markets in Asia Pacific were Australia (688 deals worth US$54.1 billion); India (645 deals worth US$27.8 billion); South Korea (572 deals worth US$66.3 billion) and Hong Kong (281 deals worth US$97.8 billion).

Luke Pais, Asean M&A leader at EY, notes, “we are in a period of volatility, which has led corporates to streamline their capital allocation, define their focus clearly, and build scale across their core businesses. This in turn drives deal activity, and we expect to see this momentum continue into 2016.”

Hope adds, “other moves in the region, such as the Asean Economic Community’s plans to create an integrated economy among 10 member countries, will also encourage M&A activities for the rest of the year and beyond, as companies look to establish or expand their presence to seize business opportunities.”

The Asset