For years, Asian corporate chieftains had cashed up balance sheets but as they scanned the horizon, they chose to stay at the sidelines of deal-making.
That changed towards the end of last year, with the US economy emerging from the doldrums and concerns over the eurozone crisis ebbing. This year, M&A specialists have seen a palpable shift in companies' attitudes towards deal-making.
“Many Asian companies have strong balance sheets and have had access to cheap debt for quite a few years, but the confidence to deploy these on acquisitions has not been there,” Roger Denny, Head of M&A, Asia Pacific at Clifford Chance told FinanceAsia. “We saw a significant turning point in confidence in the last quarter of 2013 and that continued this year,” he added.
That newfound confidence has unleashed a raft of jumbo acquisitions, ranging from Lenovo’s acquisition of IBM’s server unit for $2.3 billion and Motorola’s handset business for $2.9 billion and Singapore lender OCBC's acquisition of Hong Kong's Wing Hang Bank for $5 billion, just to name a few.
This has propelled Asia's M&A volumes up. According to data provider Dealogic, Asia-ex-Japan targeted M&A volumes have risen 25% to $446 billion so far this year compared to the same period last year. Meanwhile, Asia-ex Japan outbound M&A volumes have risen 6% to $127 billion this year from the previous year. But actual volumes aside, what is notable is the increasing number of jumbo-sized deals.
“In Asia, apart from corporate restructurings, in the past we have not seen many deals in excess of $1 billion,” said Denny. “But this year we have seen many billion dollar plus transactions, and deal sizes definitely seem to be getting bigger," he added.
Globally, M&A volumes in Europe and the US are also on the rise this year. But after years of muted activity, Asia's M&A markets have finally have seen a resurgence. "The volumes have been driven by a larger and more transformational set of deals," Mayooran Elalingam, head of M&A for Asia at Deutsche Bank told FinanceAsia. "We have seen more large cap M&A deals this year in the $5 billion-plus range than in the past," he added
Will these jumbo deals continue? Respondents to a FinanceAsia poll conducted in partnership with global law firm Clifford Chance are evenly balanced. About 49.1% of the 170 respondents said they expect to see more deals above $1 billion during the next 18 months and the remaining 50.9% said they do not expect to see more such deals.
