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.
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.
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.
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.
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.
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.
This material (including market commentary, market data, observations or the like) has been prepared by personnel in the Mergers & Acquisitions Group of JPMorgan Chase & Co. It has not been reviewed, endorsed or otherwise approved by, and is not a work product of, any research department of JPMorgan Chase & Co. and/or its affiliates (“J.P. Morgan”). Any views or opinions expressed herein are solely those of the individual authors and may differ from the views and opinions expressed by other departments or divisions of J.P. Morgan. This material is for the general information of our clients only and is a “solicitation” only as that term is used within CFTC Rule 1.71 and 23.605 promulgated under the U.S. Commodity Exchange Act.
RESTRICTED DISTRIBUTION: This material is distributed by the relevant J.P. Morgan entities that possess the necessary licenses to distribute the material in the respective countries. This material is proprietary and confidential to J.P. Morgan and is for your personal use only. Any distribution, copy, reprints and/or forward to others is strictly prohibited.
This material is intended merely to highlight market developments and is not intended to be comprehensive and does not constitute investment, legal or tax advice, nor does it constitute an offer or solicitation for the purchase or sale of any financial instrument or a recommendation for any investment product or strategy.
Information contained in this material has been obtained from sources believed to be reliable but no representation or warranty is made by J.P. Morgan as to the quality, completeness, accuracy, fitness for a particular purpose or non infringement of such information. In no event shall J.P. Morgan be liable (whether in contract, tort, equity or otherwise) for any use by any party of, for any decision made or action taken by any party in reliance upon, or for any inaccuracies or errors in, or omissions from, the information contained herein and such information may not be relied upon by you in evaluating the merits of participating in any transaction. All information contained herein is as of the date referenced and is subject to change without notice. All market statistics are based on announced transactions. Numbers in various tables may not sum due to rounding.
J.P. Morgan may have positions (long or short), effect transactions, or make markets in securities or financial instruments mentioned herein (or options with respect thereto), or provide advice or loans to, or participate in the underwriting or restructuring of the obligations of, issuers mentioned herein. All transactions presented herein are for illustration purposes only. J.P. Morgan does not make representations or warranties as to the legal, tax, credit, or accounting treatment of any such transactions, or any other effects similar transactions may have on you or your affiliates. You should consult with your own advisors as to such matters.
J.P. Morgan is the marketing name for the investment banking activities of JPMorgan Chase Bank, N.A., J.P. Morgan Limited, J.P. Morgan Securities LLC (member, NYSE), J.P. Morgan Securities plc (authorized by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority) , J.P. Morgan Australia Limited (ABN 52 002 888 011/AFS Licence No: 238188 and regulated by Australian Securities and Investments Commission) and their investment banking affiliates.
For Australia: This material is issued and distributed by JP Morgan Australia Limited (ABN 52 002 888 011/AFS Licence No: 238188) (regulated by ASIC) for the benefit of “wholesale clients” only. This material does not take into account the specific investment objectives, financial situation or particular needs of the recipient. The recipient of this material must not distribute it to any third party or outside Australia without the prior written consent of JP Morgan Australia Limited.