Date
17 October 2017
Jumbo deals involving the main companies of Hong Kong tycoon Li Ka-shing had a combined value of US$114 billion and accounted for 9 percent of Asia Pacific’s overall M&A activity for the year. Photo: HKEJ
Jumbo deals involving the main companies of Hong Kong tycoon Li Ka-shing had a combined value of US$114 billion and accounted for 9 percent of Asia Pacific’s overall M&A activity for the year. Photo: HKEJ

China slowdown may create M&A opportunities

It was a record year for Asia-Pacific dealmaking after transactions broke the US$1 trillion mark in 2015.

The regional M&A boom was driven by conglomerate restructurings, divestments, reverse takeovers and, most especially, cross-border acquisitions. 

Deal activity was up in multiple industries around the region, with M&A targeting the industrials sector taking up the largest market share at 15.4 percent.

Driven by record levels of transport & infrastructure deals, M&A activity in the industrials sector grew 83.7 percent to reach US$202.9 billion, reflecting the growing interest in infrastructure assets amid the low interest rate environment.

High technology and real estate rounded out the top three industries in 2015, and accounted for 12.9 percent and 12.7 percent market share, respectively.

Deals in telecommunications industry surged to US$132.7 billion, from US$13.6 billion in 2014, led by Hutchison Whampoa deals and the restructuring of China’s telecom carriers. 

A wave of mega deals over US$5 billion fueled the value of announced M&A deals involving Asia-Pacific companies (excluding Japan) to reach US$1.3 trillion last year, up 60.5 percent over the previous record of US$823.8 billion in 2014.

Thirty-seven mega deals accounted for 29 percent of the region’s dealmaking activity, the highest percentage since 2000.

The deals flurry was led by Li Ka-shing’s flagship companies – Cheung Kong (Holdings) Ltd. and Hutchison Whampoa Ltd. – as part of the reorganization of his diversified conglomerate into two new listed companies.

Jumbo deals involving the main companies of Hong Kong tycoon Li Ka-shing had a combined value of US$114 billion and accounted for 9 percent of Asia Pacific’s overall M&A activity for the year.

Bolstered by Li Ka-shing’s reorganization, dealmaking activity in Hong Kong was also a banner year in 2015. Overall announced M&A activity involving Hong Kong hit an all-time high of US$287.1 billion, up 64.7 percent from a year ago.

Telecommunications and real estate deals involving Hong Kong accounted for 30.1 percent and 25.3 percent of the market share, respectively.

Concerns about China’s slowdown and global uncertainties may impact activity this year. However, the slowdown is creating M&A opportunities such as companies searching for growth through acquisitions, divesting non-core or underperforming assets and possible industry consolidation.

Divestments in the region reached US$470.9 billion in 2015, up 55 percent from 2014, and the highest annual volume since records began in 1980.

China accounted for 59.1 percent of the region’s divestitures last year. Hong Kong and Singapore captured 18.4 percent and 3.9 percent, respectively.

The China slowdown is the major driver for Asia Pacific’s increased outbound activity this year. 

Chinese companies are purchasing more assets abroad, mostly targeting those in Europe and the United States, to elude slowing domestic growth.

China’s outbound activity witnessed the best start to a year in 2016 with US$76.5 billion worth of deals, and accounted for 34 percent of the global cross-border M&A this year.

Despite the uncertainties brought by market volatility, 2015 provided great opportunities for M&A deals with favorable acquisition financing conditions and excess cash. 

Target Asia-Pacific M&A announced in 2015 reached a record-breaking US$1.2 trillion, up 66 percent from 2014, and outpaced European M&A activity, by value and percentage of total M&A, for the first time in record.

The strong momentum in 2015 may not be easy to replicate this year at such a grand scale. Target Asia-Pacific M&A to date is down 45 percent from the comparative period in 2015.

The views expressed in this article are those of Elaine Tan, a Senior Deals Intelligence Analyst at Thomson Reuters.

– Contact us at [email protected]

CG



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