M&A outlook reflects growth potential
The positive M&A outlook across the region reflects shifting growth possibilities and acquisition ambitions in different markets across Asia-Pacific.
In China, despite outbound investment challenges many Chinese acquirers face, appetite for acquisitions by Chinese companies remains healthy at 46%, an intention that is at its highest level since early 2018. Survey results show that most China-based executives are seeking domestic deals. Europe also continues to be a popular investment destination — a trend seen in the market that’s been sustained since 2013.
In Japan, 57% of executives intend to pursue deals over the next 12 months, one of the highest deal intentions from Asia-Pacific respondents. Many Japanese companies are looking to grow inorganically amid a slowing local economy. There is a desire to take advantage of the lower cost of acquisition financing and expansion opportunities overseas. Meanwhile, Japan’s outbound M&A activity shows no sign of slowing down as companies plan to proactively ease competitive pressure from new and existing competitors.
In Southeast Asia (SEA), as the confidence in local economic growth has declined, so too have deal intentions. With just 41% expecting to pursue M&A in the next 12 months, this is slightly below the region’s long-term average of 42% and represents SEA’s lowest appetite since 2016. SEA corporates rated geopolitical or local political uncertainties as the greatest external risk to the growth of their businesses, causing investors in the region to take a wait-and-see approach. However, SEA buyers still recognize opportunity within the region, where the top investment destinations are Indonesia, Singapore and the Philippines.
The US, China and the UK are the top investment destinations for Asia-Pacific respondents. For global respondents, China (4), Australia (8), Japan (9) and Singapore (10) are among the top 10 investment destinations.
Across the Asia-Pacific region, 78% of executives expect private equity (PE) to be a major acquirer of assets in the next 12 months as PE dry powder continues to be at record levels in Asia-Pacific. As a result, Asia-Pacific executives expect strong competition for assets. Eighty-two percent anticipate an increase in hostile and competitive bidding in the next 12 months.