Asia-Pacific M&A set to make comeback – survey

There is a growing hunger amongst Asia-Pacific executives for M&A deals as businesses seek to capitalise on market disruptions wrought by ongoing social and trade tensions.

Fallout from the Hong Kong protests and the China-US trade war has stoked an appetite for dealmaking amongst business leaders in the region.

Around half of executives in the Asia-Pacific region are plotting an acquisition in the next year, according to an October survey by consulting firm Ernst & Young (EY).

Respondents were generally more aggressive than last year, with half expecting their M&A pipeline to increase in the next 12 months compared with 43% in the previous October survey.

The firm's Global Capital Confidence Barometer report – a twice-yearly survey of nearly 3,000 executives in 45 countries in August and September – presents a strong regional outlook even as the number and size of mergers and acquisitions across Asia decline. 

The survey's underlying message is that current conditions are ripe with opportunities for businesses willing to take the risk.

“Disruption impacting the Asia-Pacific region will only intensify M&A activities,” Harsha Basnayake, head of EY’s Asia-Pacific transaction advisory services, said in the report. “M&A is seen as a route to expand into new markets and acquire new technologies and new production capabilities. It's a search-for-growth story overall.”

Year-to-date, the number of deals announced is down 4.5% compared with this time last year, according to Bloomberg's database, while the collective value of announced deals has gone down by 15.2%.

More than 10,000 deals – collectively worth $1.2 trillion – were completed by this time last year, compared with 8,320 deals amounting to $709.1 billion so far in 2019.

The decline is most acute in Hong Kong. Entering its 21st week of straight protests over the now-withdrawn extradition bill, the city is also weathering China's ongoing trade war with the US.

The volume of M&A deals announced in Hong Kong so far this year is 5.7% down on what it was this time last year, according to Bloomberg data, while accumulated deal worth is lagging by 25.3%.

Nonetheless, regional respondents to the EY survey indicated that they were more optimistic about the economic outlook than their global counterparts. Some 46% of executives surveyed around the world said they were preparing for worsening economic conditions, compared with 32% of their colleagues in the Asia-Pacific region.

*Australia, China, Japan, Indonesia, Hong Kong, Malaysia, New Zealand, Philippines, Singapore, South Korea, Thailand, and Vietnam

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