M&A Will Drive Recovery Across Asia Pacific, With Tech Acquisition Fueling Deals

• Survey of 800 business leaders finds tech sector expecting the most M&A activity by far, while tech also driving M&A across all sectors
• Distressed investment opportunities also set to rise, driven by tech disruption and regulatory pressure

Strategic M&A activity will be a key driver of the post-pandemic recovery right across the Asia Pacific region, as companies more aggressively move to acquire technology and skills, while in some cases divesting to reduce their regulatory burdens.

That is according to a new report, Charting Growth – The New M&A Landscape in Asia Pacific, in which 800 senior executives* across the Asia Pacific region were surveyed on their company and sector transactional outlook.

Executives across Asia Pacific are sending a clear signal that deal making will be integral to their renewal and growth strategies over the course of this year and into 2022 – 77% of respondents expect M&A in their industry to increase in the year ahead, including 42% that say there will a major uptick in transactions. In terms of industries, the tech sector was far and away the most bullish, with more than three quarters (78%) predicting transactions would increase markedly over the next 12 months.

When asked what the key drivers of their own deal activity would be, more than half of respondents (57%) cited acquiring new technology and associated expertise, which jumped to 74% of healthcare companies, 85% of financial institutions, and a full 92% of technology, media and telecoms companies. This signals major consolidation across the tech sector, as fast growth companies snap up rival firms and complementary platforms, and move into new markets.

In fact, accessing new markets also ranked highly among respondent considerations (40%). Many business leaders recognize that to survive in the current market, organizations must expand their regional and global footprints, despite travel and other restrictions.

Andrew Martin, Managing Principal, Baker McKenzie Wong & Leow, Singapore, said that: “Differentiated economic recovery in the region is indicative of the varied challenges countries face in managing the pandemic. However, as a region, M&A is expected to remain robust, particularly in tech acquisitions and for financial institutions. While overall economic outlook does affect investor outlook, factors such as regulation and access to new markets (and therefore demand) will also shape the deal landscape. The power of financial investors, including private equity and venture capital, infra and credit funds, as well as family offices, will also inform the deal climate in the region.”

There is also more distressed investment opportunities expected across the region, with 63% of consumer goods and retail companies citing obsolete sales and distribution models as the biggest driver of distress in that sector, for example.

Meanwhile, across every industry, regulatory enforcement is now expected to be one of the leading factors driving possible insolvencies. Interestingly, companies in Indonesia and Thailand are most worried about increased regulatory enforcement, while companies in India are most concerned about new regulations coming in.

Akifusa Takada, Head of Japan M&A and Partner, Tokyo, said, “Japanese companies headed into 2021 flush with cash from sales of non-core assets and consolidation, and will probably turn again to outbound acquisitions later in 2021 or next year. Due to COVID-19, many Japanese companies are more actively turning inward and divesting themselves of non-core businesses partly as a result of a combination of factors such as strategic refocusing on core businesses and reducing debt burdens from the large acquisitions that they actively pursued in the past years. The M&A market in Japan has become more fragmented and diverse.”

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