SINGAPORE (April 3): Merger and acquisition (M&A) activity in Asia-Pacific excluding Japan nosedived over 1Q19 with just 666 deals amounting to US$119.9 billion ($162.3 billion), amid economic headwinds and a still-unresolved trade war between the US and China.
This is according to the latest report by Mergermarket, which highlights that 1Q19 dealmaking was at its lowest since 1Q19 in value after China’s growth began sputtering last year in 2H.
Notably, deal value in China – which accounted for nearly half or 46.6% of overall M&A activity in the region in 1Q19 – almost halved y-o-y.
Overall regional outbound activity collapsed to the worst 1Q quarter on record since 1Q12, the result of another contraction in Chinese outbound deals and tighter domestic regulation as the US continues its clampdown on China-outbound acquisitions.
Meanwhile, private equity (P/E) firms saw buyouts plunge to just 66 deals totaling US$8.7 billion, the region’s lowest value since 1Q13, although P/E exits experienced a softer l anding with US$17.7 billion across 35 deals.
Mergermarket notes how dealmaking over the same period has been similarly lackluster across most of the rest of Apac ex-Japan, save for Singapore, Thailand and Indonesia, where M&A value grew over the quarter due to large-cap, albeit fewer, deals.
In Singapore alone, CapitaLand’s US$8.1 billion acquisition of Ascendas-Singbridge from Temasek marked the region’s largest transaction of the quarter under review.
Sector-wise, industrials & chemicals remained the busiest sector for M&A in terms of both deal value and volume at US$21.5 billion and 132 deals, respectively, despite a 11.3% drop in value and 59 fewer transactions y-o-y.
The largest deal in this sector was CITIC Limited’s takeover of Jiangyin Xincheng Special Steel works from CITIC Pacific Special Steel Investment for US$2.6 billion – which Mergermarket says is reflective of the ongoing state-driven consolidation and reorganisation of China’s steel industry.
Going forward, the firm expects China to see the largest domestic companies continue to increase in market share.
Mergermarket also believes upbeat talks about a China-US trade deal; pledges to accelerate IPO approvals; and initiatives such as a proposed NASDAQ-style science and tech board on the Shanghai exchange could help to brighten up M&A prospects in a “still uncertain and ever-changing scenario”.
“Beijing is also easing restrictions on foreign ownership across a wide range of sectors, including financial services in a bid to attract foreign capital. State-led mega-deals such as the rumoured Chemchina-Sinochem merger could also have a profound impact if they materialise,” says the firm.
