- Asia-Pacific M&A intentions highest since 2017 (53%)
- M&A intentions in region exceed historic average (45%)
- 90% of C-suites believe region will generate significant growth over next three years
Despite challenges from the COVID-19 pandemic, 62% of Asia-Pacific respondents are confident they have outperformed competitors in terms of operational stability and an overwhelming 90% anticipate growth opportunities within Asia-Pacific in the next three years, according to the 23rd edition of the EY Global Capital Confidence Barometer (CCB23).
CCB23 shows a majority of Asia-Pacific respondents are interested in mergers and acquisitions (M&A), with 53% of respondents actively planning to pursue deals in the next 12 months, the highest since 2017, and significantly higher than the Asia-Pacific CCB average of 45%. Key drivers of M&A in the region include acquiring technology and innovative solutions, as well as responding to regulatory changes to secure supply chains.
As to where Asia-Pacific respondents intend to look for deals, 89% of respondents say they will seek cross-border acquisitions in the next 12 months. The enthusiasm for cross-border M&A is particularly strong for destinations including Japan and countries in Southeast Asia. Seventy-one percent of all Asia-Pacific respondents say they are planning to invest within the region, with India, Singapore, Japan, China and Thailand representing the top five M&A investment destinations.
Large private equity (PE) funds are also looking to increase their investment in the region. More than 80% of Asia-Pacific respondents indicate they expect increasing competition for assets in the coming year, with 57% saying they’ll be competing against PE firms for assets.
Concerns about competition or antitrust reviews and valuation were key reasons for deal termination in 2020, with 53% of Asia-Pacific respondents indicating that their businesses failed to complete or cancelled a planned acquisition in the last 12 months. Notably, this percentage is lower than the response of 64% to the same question one year ago.
Yew-Poh Mak, EY Asia-Pacific Strategy and Transactions Leader, says:
“As companies redefine success in a post-pandemic landscape, Asia-Pacific executives see M&A as a key lever of business transformation and acquiring technology. Executives recognize that being at the forefront of technology and digital adoption has been the key differentiator in success during the past year.”
Asia-Pacific C-suites acknowledge challenges but seeks to fast-track transformation through M&A
According to CCB23, 85% of respondents say their organizations are undergoing a significant business and technology transformation program. Despite headwinds as a result of the COVID-19 pandemic, nearly half (49%) of respondents believe their digital transformation programs have overperformed relative to their competitors.
At the same time, 89% of Asia-Pacific respondents say they have conducted a comprehensive strategic and portfolio review, and 82% say their reviews were accelerated in direct response to changing events.
Geopolitical and regulatory issues impacting transformation and strategic investment
While only 9% of senior executive respondents regard geopolitical tensions between markets to be the greatest external risk for their businesses, 85% of Asia-Pacific respondents believe that geopolitical challenges, such as trade tensions and protectionist measures, are forcing executives to alter their investment strategy. Asia-Pacific respondents also cited climate change as the second greatest external risk that could impact the growth of their business, after the continuing COVID-19 pandemic.
Yew Poh Mak, says: “Asia-Pacific business leaders have demonstrated throughout the COVID-19 pandemic the agility to navigate the storm. The pandemic has also sped up megatrends that were already underway, for example the regulatory policies attributed to climate change have become an important factor which C-suites are incorporating into strategies. Following the initial economic shock from the pandemic, executives conducted comprehensive strategic portfolio reviews to reimagine their competitive position. Now, they are seeking to accelerate their M&A and transformation programs as they look to reshape their future in the post-pandemic world.”
Find out more at www.ey.com/en_gl/ccb/asia-pacific-mergers-acquisitions.
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About the EY Global Capital Confidence Barometer
The Global Capital Confidence Barometer gauges corporate confidence in the economic outlook, and identifies boardroom trends and practices in the way companies manage their Capital Agendas — EY framework for strategically managing capital. It is a regular survey of senior executives from large companies around the world, conducted by Thought Leadership Consulting, a Euromoney Institutional Investor company.
The panel comprises select EY clients across the globe and contacts and regular Thought Leadership Consulting contributors. From November 2020 until January 2021, Thought Leadership Consulting surveyed on behalf of the global EY organization a panel of more than 2,400 executives in 52 countries; 82% were CEOs, CFOs and other C-suite-level executives.
- Respondents represented the following sectors: Financial Services, Telecoms, Consumer Products and Retail, Technology, Media and Entertainment, Life Sciences, Hospital and health care providers, Automotive and Transportation, Oil and Gas, Power and Utilities, Mining and Metals, Advanced Manufacturing, and Real Estate, Hospitality and Construction.
- Surveyed companies’ annual global revenues were as follows: less than US$500m (25%), US$500m– US$999.9m (26%), US$1b– US$4.9b (25%) and greater than US$5b (24%).
- Global company ownership was as follows: publicly listed (60%), privately held (40%).