Asian Corporates Aggressively Using M&A to Pursue Growth

Insights from M&A leaders across the region

Undaunted by volatility, Asian corporates are optimistic and eager to grow through acquisitions—both within the region and globally.

In fact, according to Dealogic, 2015 year-to-date M&A volumes in the Asia Pacific region have grown by 60% and are almost in line with those in Europe, the Middle East and Africa (EMEA).

Businesses from China to Thailand in a wide range of industries view themselves overwhelmingly as net buyers, and say they take a longer, more strategic view when determining the success of any transaction and are not afraid to pay a premium for success.

Businesses surveyed by J.P. Morgan* viewed growth via acquisitions as key to their five-year strategies. They’re relying on relationships with financial advisors to help drive good matchmaking, and they want to see senior management involvement and commitment from their counterparties to build confidence for successful transactions.

 

Eager to Grow

Asian corporations view themselves as net buyers

asiasbuyersgraphic2


Asian M&A leaders are confident acquirers and optimistic on growth in key countries and regions

Chinese and Japanese corporates surveyed were very confident in the region’s gross domestic product growth over a five-year period, while respondents in other Asian countries were more conservative.

While naming geographies with the most potential for growth over five years, survey respondents all cited Asia, followed by North America, EMEA, Latin America, Australia and New Zealand.

Asian companies have continued appetite for intra-regional M&A going forward – where they name mainland China, Indonesia, India, and Vietnam most frequently as target markets – as well as international M&A opportunities. The U.S. was identified as a key focus area, with Germany, the UK and France also top of mind in terms of attractiveness over the next five years.


Over the next five years, the most attractive countries for outbound M&A

Most Attractive Regions for M&A

 


 

Many factors are driving appetite for Asian M&A leaders

Though economic growth was indicated as the most significant driver of business, survey respondents cited changing consumption patterns, international expansion and corporate consolidation as M&A catalysts.

To meet the demands of this more consumer-driven economy, and bring their products to a broader range of customers, Asian companies are seeking value-added products, services, technologies and management skills in their acquisitions.



Timelines and Strategy

Many Asian buyers look to longer horizons

For most Asian corporates surveyed, M&A is viewed as a long-term value creation process, meaning transactions are considered successful or otherwise with an investment time horizon of more than five years.

 
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Asian buyers have a highly strategic point of view, some eschewing hurdle rates entirely

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Longer timelines in auctions

Among buyers, 73% of Asian corporates said they would participate in an auction process; of those, more than 50% would need six months to prepare for it. Compared to the typical one or two months needed by U.S. companies, many Asian businesses—especially those new to the M&A process—are still working to evolve and adapt to meet international timelines, and need more lead time to put in place pre-approvals and manage internal processes to meet the stringent timelines of an auction situation.



Making a connection

Asian businesses are relying on a proactive approach from financial advisors and senior-level engagement from counterparty management teams

In addition to sector credentials and geographic experience, survey respondents wanted to work with trusted advisors who are expected to help them identify potential targets across regions and industries.

As many Asian buyers are new to the M&A space, and have varying comfort levels with the process, they desire a higher level of engagement with a financial advisor. With the regulatory and organizational challenges of cross-border deals involving Asian corporations, that additional attention may be a key factor in helping to manage transactional complexities.

For Asian sellers, building relationships with an acquirer’s senior management is the most important criteria in determining whether to proceed with a deal. Active involvement in due diligence, availability for face-to-face meetings and engagement throughout the acquisition process are all important components of building that connection to Asian corporates. For the surveyed companies, senior management participation and engagement demonstrates respect and reassurance of support for the transaction.

*Results of the study were based on in-depth surveys of 55 Asian corporations in nine markets and seven key industries, commissioned by J.P. Morgan.

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