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Asia-Pac outbound M&A accelerating, says Baird

Asia Pacific outbound merger and acquisition activity continues to accelerate, with more than USD275 billion of transactions announced in the last 18 months alone, according to a new report released today by Baird. 

The report notes that Asia Pacific outbound M&A deal value is on a steep growth path, increasing 65 per cent in H1 2015 compared to H1 2014. Baird anticipates that both the number and the size of these transactions will continue to grow, with China increasingly challenging Japan as the leading acquirer of target companies based in North America and Europe.  Japan’s outbound M&A activity peaked in 2012 with $84 billion in deal value.  By contrast, China has been increasingly active, with $50 billion of outbound M&A in the first half of 2015. North America and Europe have accounted for over 90 per cent of Asia Pacific outbound deal value since 2005, averaging more than 650 deals annually. 
 
In the report, Asia Pacific Outbound M&A Trends: Unlocking the Asian Buyer Universe in North American and European Sales Processes, Baird analysed 350 Asia Pacific outbound M&A deals in four key sectors – Industrial, Technology & Services, Consumer and Healthcare – assessing the countries involved, type of buyer / seller, target subsector and valuation.  The report discusses each region’s motivations for acquiring overseas, including:
 
• Japan’s limited domestic growth with its shrinking, aging population
• China’s desire to procure industrial technology and supply branded Western products domestically
• Indian corporates’ strategy to move up the value chain, especially in business process outsourcing / IT
• Australasia’s desire to access developed markets and larger economies outside their own
 
“More and more, Asian companies are employing a ‘go global’ M&A strategy to elevate themselves from national to global players,” says Satoshi Matsumoto (pictured), Director of Japan M&A at Baird. “With their increasing risk appetite and experience participating in Western M&A processes, cash-rich and sophisticated Asian corporates are looking to acquire companies overseas to accelerate their growth and improve their ROE.”
 
Chris McMahon, Head of Global M&A at Baird, adds: “Asian buyers have shown that they can pay premium valuations upfront for quality Western businesses and ‘trophy assets,’ as well as take a long-term view and invest significantly in challenged companies post-acquisition.. As a result, Asian buyers’ participation in North American and European sale processes has become increasingly important, especially where there is a relevant Asian growth story or where the target represents a platform to enter attractive Western sectors.”
 
“Outbound M&A activity is increasing, especially from China, which surpassed Japan in outbound deal value in 2013,” says Anthony Siu, Head of Asia Investment Banking at Baird. “Previously, the main deal driver in China was state-owned enterprises looking to secure natural resources. Now, we’re seeing more privately-owned enterprises looking to acquire high, value-added businesses.”
 

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