Clifford Chance

Prospects remain strong for Asia Pacific M&A in year ahead

Volatility provides opportunities as well as challenges

Hong Kong:   Despite current uncertainty, Asia Pacific M&A advisers are predicting relatively positive prospects for the region's acquisition markets in the year ahead.

Most respondents to this year's Clifford Chance/Finance Asia M&A Survey expect an increase in the levels of intra-Asia and Asia outbound acquisitions - 66% and 71% respectively - although only 42% predict inbound acquisitions will increase.

Although slightly down on last year's figures, the 2011 figures remain materially higher for intra Asia and Asia outbound M&A activity than those recorded by the first Asia Pacific M&A survey in 2007.

Survey headlines for 2011 are:

• Acquirers in the region are most likely to come from, in order: mainland China, the US, Japan, India, Eurozone and Singapore.
• Top target countries for these acquirers are, in order: mainland China, Indonesia, the US, Eurozone, India and Australasia.
• Favourite industry sectors for acquisitions are, in order: mining and resources, oil and gas, consumer goods and retail, technology/media/telecoms, manufacturing and financial services.
• Deals size will be concentrated in the US$100-500 million range, according to over half of respondents.
• Market volatility will see Western investors increase their focus on emerging markets for growth, while Asia Pacific acquirers will view the uncertainty in the West as an opportunity for acquisitions there.
• Protectionism is one of the most significant concerns for buyers.

"The market uncertainty is clearly creating an unsettled environment and if that continues it will affect some deal activity," said Roger Denny, Head of M&A, Asia Pacific, at Clifford Chance.

"However, companies in the Asia-Pacific region also see the environment as an opportunity for strategic transactions and to take advantage of lower valuations and less severe competition for targets.  We are therefore optimistic that will continue to drive outbound and intra Asian activity. The rationale for companies in the region to secure supplies of natural resources, acquire new platforms for growth, and reposition their businesses remains unchanged."

While financing was an increasing concern compared to last year's survey, other factors in closing a successful deal remained more important to respondents.

"Navigating the various hurdles in cross-border M&A deals in Asia Pacific continues to be challenging before acquirers even reach the issue of funding," said Roger. "the survey tells us that having the right advisory team, navigating the legal and regulatory environment – especially for inbound investors – reliable due diligence, and negotiating good structures and protections are still very important to deal success in this region."

"Protectionism was a significant concern identified in last year's survey and continues to be a significant issue this year" said Roger.  "This is understandable with the current economic environment.  This is an issue which needs to be addressed early in the process and if buyers and their advisers manage it accordingly, in our view, it is likely to result in a successful outcome."

Notes to editors:

This is the fifth year in which Clifford Chance and Finance Asia have collaborated on a regional M&A survey.  184 respondents were surveyed between 31 August and 14 September 2022, with 47% working at CEO, COO, MD, CFO or director level.  36% of respondents came from the banking sector, 17% from investment management and alternative funds, and 17% from companies and manufacturers.  29% of respondents were based in Hong Kong, 19% in Japan, 11% in Singapore and 7% in mainland China.