Japan

Strong M&A rebound makes for another record year for Japan

  • Japanese M&A has strongly rebounded post-Covid, resulting in a competitive growth environment for corporates. A total of 2,794 deals were made in the first eight months of the year - up 15.8% from the same period in 2020, and the most since 1985 when data started being compiled, according to Kyodo News[1]
  • The most significant return related to overseas acquisitions - Q2 & Q3 2021 saw average monthly deal count increase by 85% compared to Q1[2], with much of this coming from the manufacturing / industrials industries, particularly in the areas of electronics, automation and other capital equipment. Tech & software also played a key role

International deal-making returns

  • Japanese M&A has been driven this period by the physical return to international deal-making, signalling a return of confidence not just for M&A, but business activity overall
  • Geographically, the US and Europe were the most prominent targets for Japanese outbound investments, with a 36% and 18% increase respectively[3]
  • However, given some remaining Covid-19 restrictions following the 2021 Olympics, many companies are still conducting deal processes on overseas acquisitions from Japan, particularly with familiar targets

Streamlining Japanese portfolios

  • The pandemic played a significant role in encouraging efficiencies, driving Japanese corporates to streamline their portfolios
  • Non-performing businesses lacking in critical mass, growth prospects or profitability, have been stripped to make way for profitable acquisitions, whereas previously there was a trend of ‘tolerance’ by the domestic shareholder

Western interest in Japan grows

  • Q3 2021 saw several notable inbound acquisitions in Japan, driven by the trends above, including:
    • Alphabet’s acquisition of Pring[4],a smart phone based fintech company, for USD 85m
    • Paypal’s acquisition of Paidy[5], a provider of ‘buy now pay later’ solutions in Japan, for USD 2.7bn 
    • Footlocker’s acquisition of Atmos[6], a footwear retailer, for USD 360m

Japan has a new Prime Minster

  • Newly elected Fumio Kishida is a former banker, and provides a wealth of financial experience for Japan’s economy
  • As Kishida prepares for a snap general election on October 31, the benchmark Nikkei Stock Average hit its highest level in 31 years[7]  - amidst increasing confidence in the ruling coalition’s release of further fiscal stimulus 
  • This economic positivity provides a healthy back-drop for deal-making

Outbound deals by sector (by %)[8]

 

 

 Outbound deals by region (by %)[9]

Key M&A transactions in Q2 & Q3

Source for all key deals: Mergermarket (JPN), Mergermarket, 1 April to 30 September (criteria available on request)

Company to watch

Representative Transaction

Date Announced

Transaction Type

Regions

Sectors & Keywords

Value (USDm)

JERA Co., Inc.

Aboitiz Power Corporation (27% Stake)

27/09/2021

Overseas acquisition

Philippines

Energy

1,580

SoftBank

Revolut Limited

15/07/2021

Overseas acquisition (minority stake)

United Kingdom

Internet / e-commerce

800

Toyota Motor Corporation

Level 5

26/04/2021

Overseas acquisition

USA

Technology & Software

550

Panasonic

Blue Yonder, Inc. (80% Stake)

23/04/2021

Overseas acquisition

USA

Technology & Software

7,100

Sony & others

Epic Games, Inc.

13/04/2021

Overseas acquisition

USA

Technology & Software

1,000

 

China

A focus on tech

  • The Chinese M&A market has seen venture capital and growth private equity firms gain momentum in the last two quarters, as tech dominated Chinese deals demonstrate strong performance[10]
  • This performance of China focused tech deals has inspired confidence, driving a resurgence of outbound activity during the period

Industrials also leading the way

  • As demonstrated in the charts below, industrials sub-sectors such as automotive, semiconductor and materials space have remained the most favoured sectors among Chinese buyers (alongside tech & software). Just like Q1 2021, industrials led the way in Q2-3, representing 26% of all announced M&A activity in volume[11]

Chinese M&A rebounds

  • In addition to industrials, tech & software and healthcare also took 17% and 14% of all announced M&A activity in volume[12], respectively – a reflection of their strength throughout the pandemic
  • Mainland Europe and the UK accounted for one third of outbound transactions, compared to nearly half in the preceding quarter[13]. The drop could be attributed to the UK (a notable 10% drop QoQ[14]) due to lingering political tensions and continued pandemic-induced flight suspensions
  • Despite undertones of ongoing political tension, outbound deals between China and the US have significantly increased - a 13% uplift QoQ[15]. This shift could be driven by a renewed appetite for advanced computer technology and biotechnology
  • Notable transactions in Q2 & 3 2021 include:
    • A consortium of investors led by CBC Group acquired a 47% stake of South-Korea based Hugel - the listed botox maker - from Bain Capital[16]
    • Tencent’s acquisition of British video game developer, Sumo[17]
    • Gotion High-Tech’s acquisition of Bosch’s plant in Göttingen[18]
  • As demonstrated below, Q2 & Q3 2021 maintained momentum from the previous quarter – in our view, driven by the rapid rebound from the pandemic, strong investment appetite and recovering corporate earnings in China. The number of total outbound M&A transactions in these two quarters reached 93, worth USD 25 bn[19]

Outbound deals by sector (by %)[20]

Outbound deals by region (by %)[21]

 

Key M&A transactions in Q2 & Q3

Source for all key deals: Mergermarket (CHN), Mergermarket, 1 April to 30 September (criteria available on request)

Company to watch

Representative Transaction

Date Announced

Transaction Type

Regions

Sectors & Keywords

Value (USDm)

FountainVest Partners

ZIWI Limited

20/09/2021

Overseas acquisition

New Zealand

Consumer, Leisure & Retail

1,057

CBC Group

Hugel (46.85% Stake)

25/08/2021

Overseas acquisition

South Korea

Healthcare

1,479

Tencent

Sumo Group (91.62% Stake)

19/07/2021

Overseas acquisition

United Kingdom

Technology & Software

1,161

CITIC Capital

Quanergy Systems

22/06/2021

Overseas acquisition

USA

Technology & Software

970

Mindray Medical International

HyTest

16/05/2021

Overseas acquisition

Finland

Healthcare

662

 

India

  • India’s GDP growth rate for Q2 & 3 2021 is expected to be 7.9%, according to The Reserve Bank of India, with full financial year growth expected to reach 9.5% at year end[22]
  • The economy gradually opened after mass vaccinations this period, and the encouraging signs of recovery from the ‘second wave’ dissipating, will likely have a positive knock-on effect for deal flow
  • As demonstrated below, outbound deals in this period have largely been driven by the technology & healthcare sector. Technology deals, in our view, were driven by an appetite for capabilities such as data analytics, cloud infrastructure and digital application development. Whilst healthcare deals were driven by the acquisition of generic drugs company and manufacturing facilities

The entry of crypto-unicorns

  • The Indian start-up ecosystem is firing on all cylinders with 30 new unicorns (2021)[23]. These included the introduction of CoinDCX and Licious - the first crypto[24] and D2C brand[25] unicorns respectively
  • India is tailing China with its adoption and drive in new age sectors, including e-commerce, social commerce, ed-tech, food-tech, and digital mobility
  • This is attracting multiple investors and driving valuations higher, compounded by the performance of these sectors throughout Covid-19 restrictions and the subsequent public shift to a digital economy[26]
  • Buyout transactions have been an area of focus for private equity funds in India for some time now, driven by low interest rates and volumes of cash[27] - recent examples include Barings Asia buyout of Hinduja Global[28] and Blackstone buyout of ASK[29], both billion USD transactions
  • Pre-IPO and late stage transactions are also gaining traction[30], with funds conducting deals with a view to benefitting from near term IPO pops, for example Edelweiss & IIFL investment in Byju’s[31] and Temasek & Warburg Pincus’ investment in Ola[32]
  • India continues to attract global funds due to its skilled workforce and economic growth prospects[33] eg TPG, Softbank, Accel are just a few of those actively pursuing transactions in India. This in turn has supported and, we believe, will continue to support, deal momentum, alongside India’s digital adoption and growth outlook

Conglomerates lead consolidation

  • Larger company consolidation for inorganic growth has been a trend in Q2 and Q3, highlighted by domestic M&A deal volumes 86% higher in Q3 YoY[34], particularly across ed-tech, insurance, logistics and e-commerce[35]. Conglomerates such as Reliance, have also been actively pursuing M&A opportunities, particularly in the tech & e-commerce sector, driving deal volumes across the space[36]
  • Some notable M&A transactions include PayU’s acquisition of Bill desk[37] and Byju’s acquisition of Great Learning and Gradestack Learning[38]

Outbound deals by sector (by %)[39]

 

Outbound deals by region (by %)[40]

 

Key M&A transactions in Q2 & Q3

Source for all key deals: Mergermarket (IND), Mergermarket, 1 April to 30 September (criteria available on request)

Company to watch

Representative Transaction

Date Announced

Transaction Type

Regions

Sectors & Keywords

Value (USDm)

Reliance Retail Ventures

Just Dial Limited

16-July-2021

Domestic Acquisition

India

E-Commerce

960

PayU

Billdesk

01-Sep-2021

Domestic Acquisition

India

FinTech

4700

HDFC Life Insurance

Exide Life Insurance

03-Sep-2021

Domestic Acquisition

India

Financial Services

910

Think & Learn (Byju’s)

Epic Creations Inc.

21-July-2021

Outbound Acquisition

US

Ed-Tech

500

Think & Learn (Byju’s)

Great Lakes E-Learning

26-July-2021

Domestic Acquisition

India

Ed-Tech

600

Tata Sons Limited

Tejas Networks

29-July-2021

Domestic Acquisition

India

Telecom

340

Delhivery

SpotOn Logistics

30-July-2021

Domestic Acquisition

India

Logistics

210

 

South Korea

Looking to the future

  • Foreign acquisitions of Korean assets have continued to be relatively inactive in Q2 & Q3 2021 due to the impact of Covid-19 on overseas buyers. That said, a notable inbound M&A transaction during this period was Softbank Vision Fund’s 24.8% stake acquisition in Yanolja, a Korean operator and provider of online platform for travel and accommodation, for USD 1.6 bn[41]
  • A key driver of deal flow has, however, been large conglomerates gearing up for post-pandemic growth by acquiring growth potential businesses in a buy-out spree.
    • Some notable M&A transactions include E-mart’s 80% stake acquisition in eBay Korea (eBay’s e-commerce business in South Korea) for USD 2.9 bn[42], and Kakao’s acquisition of Croquis - a Korean operator of fashion shopping platform - for USD 865 m[43]
  • The largest outbound investment destination in this period was the US - with sixteen deals worth USD 4 bn, accounting for 39% of all outbound deals. The US’ attractiveness as an investment destination is increasing based on its high economic growth rate and favourable business conditions, such as a low corporate tax rate

Digital transformations drive deal flow 

  • Tech & software and consumer businesses led outbound deals in South Korea during this period, accounting for 44% of all outbound activity[44]
  • Tech & software activity has been driven by investors’ interest in the digital transformation drive to adapt post-pandemic challenges, and the subsequently complex business environment. One of the notable outbound M&A transactions in this space was Kakao Entertainment’s 59.4% stake acquisition in Tapas Media - the third-largest US digital comics platform - for €282.8m[45]
  • For the consumer, leisure & retail sector, Centroid Investment Partners’ acquisition of TaylorMade Golf Company - a leading global manufacturer of golf equipment, balls, bags and accessories - for €1.4bn[46] was the most notable outbound M&A transaction

Outbound deals by sector (by %)[47]

Outbound deals by region (by %)[48]

 

Key M&A transactions in Q2 & Q3

Source for all key deals: Mergermarket (KOR), Mergermarket, 1 April to 15 September (criteria available on request)

Company to watch

Representative transaction

Date announced

Transaction type

Regions

Sectors & keywords

Value (€m)

Netmarble Corporation

Spin X Games
(100% Stake)

2021-08-02

Overseas acquisition

South Korea
/ Hong Kong

Technology & Software

1,844.2

Centroid Investment

TaylorMade Golf Company, Inc.

2021-05-11

Overseas acquisition

South Korea / USA

Consumer, Leisure & Retail

1,407.3

HYBE Co. Ltd.

Ithaca Holdings LLC

2021-04-02

Overseas acquisition

South Korea / USA

Business & Tech-Enabled Services

849.8

CJ Cheiljedang Corp.

Schwan's Company (19% Stake)

2021-06-16

Overseas acquisition

South Korea / USA

Consumer, Leisure & Retail

362.2

SK Holdings Co., Ltd.

VinCommerce General Trading Services JSC (16.26% Stake)

2021-04-06

Overseas acquisition

South Korea / Vietnam

Consumer, Leisure & Retail

346.5

Kakao Entertainment Co, Ltd.

Tapas Media, Inc. (59.64% Stake)

2021-05-11

Overseas acquisition

South Korea / USA

Technology & Software

282.8

 

Southeast Asia

The resurgence of M&A

  • As observed in the last few quarters, Southeast Asia is expected to continue its strong deal making momentum for the rest of the year - with regional consolidations, large private equity war chests, Special Purpose Acquisition Companies (SPACs) and economic recovery being the key drivers for deal activity. Cross-border activity is also expected to rebound sharply as overseas investors seek to capitalise on the region’s vast economic potential[49]
  • Southeast Asian M&A activity saw strong recovery in Q2 & Q3 despite the Covid-19 Delta variant causing renewed lockdowns within the region[50]
  • With rising vaccination rates across major Southeast Asian countries and measures put in place to tackle Covid-19 as an ‘endemic’, companies are rebounding and banks have increased their willingness to lend, which has eased overall deal making[51]
  • Furthermore, regional deal values have benefitted significantly from the US SPAC boom in the quarter, for example, the merger of Singapore-based ride-hailing giant, Grab with SPAC Altimeter Growth Corp for USD 40 bn[52]
  • Like Q1 2021, intra-Asia deals continued to dominate in Q2-3, with 42 deals accounting for 47% of all outbound deals[53]

Spotlight on Vietnam

  • Despite the escalating pandemic status and subsequent lockdowns, investors continue to be attracted by Vietnamese companies as the strong expected annual GDP growth of c.5%[54] denotes ‘potential’
  • As such, the Vietnamese M&A landscape saw a 30% growth in deal volume in Q2 & Q3 2021 YoY[55] as investors continue to be confident in the country’s growth potential and outlook
  • The financial services sector continues to be a key driver in this M&A uptick, as proven in Q2 & Q3 with the likes of SMBC Consumer Finance Co., Ltd’s 49% stake acquisition in VPBank Finance Company Limited from Vietnam Prosperity Joint-Stock Commercial Bank[56], and Bank of Ayudhya Plc’s acquisition of SHB Finance by from Saigon-Hanoi Commercial Joint Stock Bank[57]
  • With consumer finance licenses limited in supply and heavily regulated in Vietnam, foreign investors have been aggressively bidding for Vietnamese consumer finance companies in hopes to secure their place in the fast-growing Vietnamese consumer finance market[58]

Outbound deals by sector (by %)[59]

Outbound deals by region (by %)[60]

Key M&A transactions in Q2 & Q3

Source for all key deals: Mergermarket (SEA), Mergermarket, 1 April to 30 September (criteria available on request)

Company to watch

Representative transaction

Date announced

Transaction type

Regions

Sectors & keywords

Value (USDm)

Grab Holdings Inc

Altimeter  Growth Corporation

13/04/2021

Overseas acquisition

Singapore / US

Technology & Software

34,690

PT Aplikasi Karya Anak Bangsa

PT Tokopedia

17/05/2021

Domestic acquisition

Indonesia

Technology & Software

7,560

PTT Global Chemical Pcl

Allnex GmbH

 

12/07/2021

Overseas acquisition

Thailand / Germany

Chemicals/ materials

4,747

Axiata Group Bhd

Celcom Axiata Bhd

21/06/2021

Domestic acquisition

Malaysia

Telecommunications

4,291

FinAccel Pte Ltd.

VPC Impact Acquisition Holdings II

02/08/2021

Overseas acquisition

Singapore / US

Financial Services

2,000

JERA Co., Inc.

Aboitiz Power Corporation (27% Stake)

27/09/2021

Overseas acquisition

Japan / Philippines

Energy

1,580

SMBC Consumer Finance Co., Ltd.

VPBank Finance Company Limited (49% stake)

28/04/2021

Overseas acquisition

Japan / Vietnam

Financial Services

1,372

 

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