Asia Access Quarterly: Asia's return to outbound M&A
Date
2 min read
Asian buyers are ready to resume their overseas spending
Despite Covid-19’s negative impact on deal flow, the majority of Asian companies have continued to express interest in cross-border M&A transactions. As demonstrated below, while Industrials still accounts for the lion’s share of activity, Healthcare, IT & Software and Consumer sectors have seen heightened M&A activity from Asian investors since lock-down in March, demonstrating a broadening of interest from investors in the territory[1].
Source for charts [1]
See full sector analysis, here >
As for the targets of this outbound investment from Japan, North America and Europe make up the majority. For China, the political headwind in the US has redirected investments into Asia, while the rest of the regions remain at previous years’ activity levels [2]. See below YTD outbound M&A destinations for both countries. This trend is likely driven by the macro-political environment between the US and Asia, but also the emergence of intra-Asia opportunities as global investment hubs set up shop.
Source: Japan & China M&A outbound destinations: Q1-Q3 2020 [3]
It’s clear that Chinese buyers are slightly more nuanced. When DC Advisory recently surveyed[4] 50 Chinese strategic and financial acquirers from a mix of public companies and private equity houses who are generally interested in cross-border transactions (many have worked with DC Advisory previously), we were able to glean insights into the Chinese economy, and companies' strategic appetite for outbound M&A. Highlights of which include:
- Chinese preference for the ‘stage of target’ is maturity, which is driven by Chinese appetite for well-established brands or business models that can be applied to their own domestic market
- Today, few Chinese acquirers are pursuing $billion+ targets, but instead focusing on the mid-cap opportunities which have a clear strategic rationale – for example the nature of the business, or the buyer’s wider commercial vision. There is no strong preference for the size of target, but rather the specific nature of the business or fit with the buyer’s strategy is more important[5]
Source for charts [4]
It’s likely that Japanese investor sentiment is similar – with most other Asian territories following suit.
See full sector by sector analysis here >
[1] According to announced volumes Q1-Q3 2020, Mergermarket data, 8 October 2020
[2] According to announced volumes Q1-Q3 2019 vs Q1-Q3 2020, Mergermarket data, 8 October 2020
[3] According to announced volumes Q1-Q3 2020, Mergermarket data, 8 October 2020
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