Asian M&A trends have become an essential indicator of the development of industry markets and reflect the processes taking place in them. Here are the most important facts that everyone should know.
M&A trends in the Asia-Pacific region
In the context of globalization processes and economic and strategic barriers to organic growth, mergers and acquisitions (M&A) are becoming one of the main ways to expand a company’s activities, conquer new markets, and acquire control over competitors’ technologies. Emerging Asian market companies have been attractive M&A investors over the past 20 years due to their economic growth and high-profit potential.
The M&A market is very dynamic and strongly responsive to global economic processes. So since M&A is one of the ways to expand a business, the ability and desire of companies to develop a business are highly dependent on the economy’s growth rate.
The M&A market is highly segmented on a territorial basis. The greatest activity is observed in the North American region and in Europe. Based on the dynamics of the market, the Asia-Pacific region was a leader, which in 2014 added 55% from the level of 2013. It was the highest level since surveillance of the region began in 1980. In 2015, the size of the mergers and acquisitions market in the Asia-Pacific region for the first time exceeded 1 trillion USD and amounted to 1.27 trillion dollars.
Important things to know about the Asian M&A sector
Seven interesting facts can describe the tendencies of the Asian M&A market:
- China and India offer tremendous opportunities for M&A deals, given the sheer size and growth potential of these two countries. China will become the world’s largest insurance market in a few years, and there will be plenty of growth opportunities.
- The decline in the M&A market in China is associated with a decrease in transactions for Chinese investors’ purchase of foreign assets. Until 2016, the share of transactions grew at an unprecedented pace. The reduction of such transactions, in turn, is associated with the new policy of the Chinese authorities to control foreign investment.
- The Chinese government sees foreign investment as a vehicle for foreign know-how, not just jobs and capital. The Chinese government is seeking to encourage foreign firms to form joint ventures rather than simply acquiring Chinese firms. In some areas, joint ventures cannot be avoided due to government restrictions on foreign ownership. This rule applies to most financial services, such as life insurance, fund management, securities, and banking, where foreigners cannot own a controlling stake.
- The innovation and consumer sectors are the most popular among Chinese investors when investing in foreign economies, as Chinese companies see access to modern technologies and successful trade brands as their primary goals. In this regard, Chinese companies’ most popular destinations for foreign investment are European countries, the United States, and some Asian countries.
- In general, the Chinese M&A market is dominated by domestic transactions where the buyer and seller are Chinese residents. On average, their share in the total amount of transactions in value terms for the period 2015–2018 amounted to about 80%.
- In China, there is no uniform legislation governing mergers and acquisitions of companies. However, there are many laws and regulations governing such transactions depending on the type of buyer, the purpose of the company, and the industry in which the investment is made.
- Prohibited industries include publishing, mining rare-earth metals, nuclear power, delivery, postal services, and other industries that could harm the country’s national security.