Mergers & Acquisitions: Asia Comes Into Its Own

by Carol Ko, 29 July 2012

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topics:
Corporate Finance

tags:
mergers & acquisitions

The big M&A news last week was Chinese oil major CNOOC’s US$15.1 billion bid for Canada’s Nexen. If approved by regulators, the all-cash deal will be the largest acquisition ever by a Chinese enterprise, after CNOOC abandoned a US$18-billion attempt in 2005 to buy American energy firm Unocal because of political opposition in the US.

Expect more big-ticket announcements. Ashraf Khalek, Managing Director Asia-Pacific and Japan at Intralinks, which provides the electronic data ‘clean rooms’ that prospective M&A buyers and sellers use to conduct due diligence and exchange sensitive communications and documents, told CFO Innovation’s Carol Ko that the Asia-Pacific M&A market is now as large as North America’s in terms of the number of deals. Excerpts:

We tend to think the M&A landscape in Asia is not as developed as in the West. Has this changed given the global recession in 2008?

I'll give you two facts first. Fact one: The M&A marketplace in Asia-Pacific (APAC), as measured in deal count, is as large as the North America one. Fact two: The M&A marketplace in APAC in 2011 for the full year has grown 18% over 2010.

If you look at the number of deals over the last four to five years in APAC, it's been a gradual rise, whereas if you look at North America and Europe, Middle East and Africa (EMEA), you'll see a dip around the global recession [in 2008-09], and then a flattening out.

The M&A market in APAC is growing because APAC is internally self-sufficient, and is not reliant on investments from the Americas and EMEA. Given the geographical spread of APAC, there are a lot of Chinese, Japanese, and increasingly, Indian companies buying ASEAN and Australian companies.

What companies are Chinese, Japanese and Indian companies buying in APAC?

The Chinese companies are intending to focus on the mining resources industries; the Japanese companies are very big on the manufacturing and consumer industries; and the Indian ones are also focusing on the manufacturing and services industries.

What about the value of M&A deals? According to Thomson Reuters, the value of Asia ex-Japan M&A deals in the first half of 2012 fell nearly 30% to US$223.3 billion compared to the first half of 2011.

To try to assess the health of a M&A market, I believe the volume of the deals is more important than value because, if you have a high volume of M&A deals, or an increasing volume of deals, it means that M&A activities are happening across the economy, across sectors and across company sizes. If you focus only on the value of the high-value deals, those are typically going to be the larger companies buying larger companies.

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