New research from the Grant Thornton International Business Report (IBR) reveals that dynamic businesses (43%) – the fastest growing, most agile companies in the survey – are leading way in M&A growth on the regional level, compared to 16% for all businesses. The results confirm that leaders of the world's most progressive businesses view acquisitions as an important means to supplement and boost their existing operations.
The sectors that are most likely planning to grow through acquisition in the next three years are financial services, agriculture, hunting, forestry and fishing, mining & quarrying, professional services and electricity gas & water supply/utilities. The CLP Power acquisition in Hong Kong of the Castle Peak Power Company Limited and Hong Kong Pumped Storage Development Company Limited is a high profile dynamic business M&A case in 2013 in Hong Kong.
“As a renowned financial hub, Hong Kong companies are also attractive to capital from both mainland China and international companies," says Eugene Ha, advisory partner at Grant Thornton Hong Kong.
"The recent acquisition cases, including the Chong Hing Bank by Guangzhou-based Yue Xiu Group and the Wing Hang Bank by Singapore-based OCBC Bank, in the financial services industry are examples of mainland Chinese and foreign companies leveraging established Hong Kong companies’ network to access the international capitals flowing through here.”
Ha adds that the wave of local banks’ M&A deals could also be attributed to the aging founding management and fierce competition from the international banks in Hong Kong. "It is a good exit option for family owned businesses if they have the intention to sell. Senior executives of Dah Shing Bank and East Asia Bank have publicly welcomed acquisition inquiries,” Ha notes.
Twenty-one percent in Hong Kong seriously considered 1 to 5 acquisition opportunities in the past 12 months. The IBR also reveals that 15% of businesses surveyed in Hong Kong said they expected to grow through M&A over the next three years, down from 18% in 2012. In the Asia Pacific region, 16% of businesses expect to grow through M&A over the next three years, dropped from 22% in 2012.
Despite the slight downward trend revealed by the IBR, 21% of the Hong Kong respondents have given serious consideration to one to five opportunities for acquisition over the past 12 months, followed by 2% for six to ten opportunities and 3% for more than 10. In terms of M&A deal counts, there were over 70 in the first three quarters of 2013 in Hong Kong. Cross border business expansion is one of the biggest incentives of M&A deals. These are vital signs that the Chinese/Hong Kong market may return in 2014.
"The evidence that these businesses are actually investing time and funding into finding the right acquisition candidate now, rather than just stating an aspiration to acquire in the future, is a great indicator of a robust market," say Ha. "Companies should look for a trusted advisor who can provide a holistic service from finding the right target, due diligence, tax planning, negotiation support to deal completion."