M&A Deals Picking Up Pace in Asia

After a long lull in investment activity, M&A deals are picking up across Asia. In a region that has often been attractive for its growth opportunities, M&A has recently experienced a quiet spell. In the first half of 2024, deal volumes and values in the Asia-Pacific decreased by 23% and 35%, respectively, compared to the first half of 2023, according to an analysis by PwC. Private equity movements have also taken a hit. Hesitant to move forward with new projects due to sluggish economic growth, high interest rates, and geopolitical tensions, Asian private equity funds raised USD100 billion in 2023—the lowest figure in a decade, according to Bain & Company.

However, there are signs of recovery. The number of announced Southeast Asia M&A deals in the first five months of 2024 was relatively muted, but there has been an increase in preparatory sell-side steps being taken by financial sponsors in anticipation of more favourable economic conditions and stable to lower interest rates. This is likely to translate to a higher number of M&A deals in the mid to later part of 2024.

Activity in Japan has also been encouraging. In 2024, M&A activity in Japan has been robust, with private equity transactions being particularly active. Ambitious Japanese companies such as Nidec and Dai-ichi Life are taking advantage of corporate governance reforms and the METI’s newly published takeover guidelines by commencing unsolicited takeover offers. There have been several significant outbound deal announcements, and an increasing pipeline of such deals is being observed.

While a wait-and-see approach may have dominated the past year, some Asian investors continued to seek opportunities domestically, regionally, and internationally in growing sectors such as healthcare, technology, infrastructure, energy, financial services, and retail. Notable transactions include Malaysia’s Gentari acquiring a 49% stake in Northland Power’s Hai Long offshore wind project in Taiwan, and Singapore’s Thomson Medical Group purchasing FV Hospital in Ho Chi Minh City for USD381.4 million, marking the largest hospital acquisition in Vietnam’s history.

In terms of outbound investments, South Korean asset manager Mirae Asset Financial Group acquired Sharekhan, India’s ninth-largest brokerage, while Tokyo Gas purchased Rockcliff Energy II in Texas for USD2.7 billion. Additionally, Taiwan’s Bora Pharmaceuticals completed its acquisition of Upsher-Smith Laboratories in Minnesota, expanding its manufacturing capabilities.

Domestic consolidation is also evident, with Amorepacific increasing its stake in COSRX, Sime Darby selling its interest in Ramsay Sime Darby Health Care, and Thailand’s WHA Corporation acquiring a stake in GC Logistics Company. In the Philippines, AREIT purchased the Seda Lio hotel as part of a larger strategy to enhance its asset portfolio.

Looking ahead, analysts are optimistic about a resurgence in deal-making in the latter half of 2024, particularly in resilient sectors like energy transition, digital transformation, and healthcare. The return of market auctions and the involvement of cash-rich strategic investors are encouraging signs for the M&A landscape. However, navigating the varying regulatory frameworks across Asia will be crucial for successful transactions, as countries implement changes to enhance clarity and consistency in their investment environments.

Jake Robson, editor