As the Asia-Pacific region grapples with economic headwinds and geopolitical complexities, the investment landscape is evolving rapidly. While 2024 started with a slowdown in M&A activities, the tide appears to be turning. The question remains: Are we witnessing the beginning of a new wave of strategic deals and foreign investments that could reshape the region's economic future?
In a region that has so often been attractive for its growth opportunities, M&A has recently seen a quiet spell. In the first half of 2024, deal volumes and values in the Asia-Pacific decreased by 23% and 35%, respectively, compared to the first half of 2023, according to an analysis by PwC.
Private equity movements have also taken a hit. Hesitant to move forward with new projects on account of sluggish economic growth, high interest rates and geopolitical tensions, Asian private equity funds raised USD100 billion in 2023 – the lowest figure in a decade, according to Bain & Company.
Things are looking brighter
“The number of announced Southeast Asia M&A deals in the first five months of 2024 was relatively muted, but there has been an increase in preparatory sell-side steps being taken by financial sponsors in anticipation of more favourable economic conditions, and stable to lower interest rates,” says Jon Nair, director of corporate and finance at Drew & Napier in Singapore. “This is likely to translate to a higher number of M&A deals in the mid to later part of 2024.”
Activity in Japan has also been encouraging. “So far in 2024, M&A activity in Japan has been robust, with private equity transactions being particularly active,” says Ken Lebrun, a Tokyo-based corporate partner at Davis Polk. “You also see ambitious Japanese companies such as Nidec and Dai-ichi Life taking advantage of corporate governance reforms and the METI’s [Ministry of Economy, Trade & Investment] newly published takeover guidelines by commencing unsolicited takeover offers. There have been several significant outbound deal announcements and we are seeing an increasing pipeline of such deals.”
Keeping the ball rolling
While a wait-and-see approach may have been a dominant theme in the past year, some Asian investors continued to hunt for opportunities domestically, regionally and internationally in growing sectors such as healthcare, technology, infrastructure, energy, financial services and retail, among others (see M&A tracker HERE).
In December 2023, Malaysia’s Gentari snapped up 49% of Toronto-based Northland Power’s ownership in the Hai Long offshore wind project located in Taiwan. The companies will share in the value creation of offshore wind power, while supporting Taiwan’s transition to renewable energy. Northland retains a 30.6% ownership interest and will continue to take the lead role in Hai Long’s construction and operation.
Capitalising on opportunities in healthcare, Singapore’s Thomson Medical Group forked out USD381.4 million to purchase FV Hospital in Ho Chi Minh City, a deal touted as the largest hospital acquisition in Vietnam’s history.
The acquisition “expands our presence to cover three of the region’s most important geographies in healthcare, giving us access to a flourishing market and a deep bench of talent, while providing critical inroads into neighbouring countries like Cambodia, Laos and Myanmar,” said Thomson Medical’s executive vice chairman Kiat Lim in a press release.
In March, Japan’s Sumitomo Life Insurance Company upped its stake in Singapore Life Holdings, making it a wholly-owned subsidiary as it bought out existing shareholders in a USD780 million deal. Sumitomo regards Singapore as a key market and gateway to fulfilling its wider expansion plans in Asia.
Not all the action was concentrated inbound. Asian appetite for overseas investment saw South Korean asset manager Mirae Asset Financial Group acquire Sharekhan, India’s ninth-largest brokerage firm, last December following a bidding process. The same month, Tokyo Gas announced its purchase of Texas-based Rockcliff Energy II for USD2.7 billion to increase its overseas reach in natural gas markets. Tokyo Gas purchased Rockcliff from private equity firm Quantum Energy Partners.
In March, Taiwan’s Bora Pharmaceuticals completed its acquisition of Minnesota-based generics manufacturer and marketer, Upsher-Smith Laboratories. The deal gives Bora its first US manufacturing site, and will deepen Bora’s product portfolio and global distribution channels.
Meanwhile, in April, Japan’s Sekisui House, through a subsidiary of its US business controlling company, completed its acquisition of MDC Holdings, a leading homebuilder in the US.
“The demographic issues facing Japan are galvanising Japanese companies across almost all industry sectors to focus on outbound investment,” says Lebrun. “The rapidly ageing and declining population means that companies in industries ranging from consumer products and food and beverage to insurance, asset management, manufacturing and home-building all need to invest overseas for growth.”
Domestic consolidation across sectors has also been a trend in Asian markets.
Last October, Korean beauty and cosmetics company Amorepacific acquired an additional stake in hypoallergenic skincare brand COSRX, giving it 93.2% ownership and making COSRX a subsidiary.
In November 2023, Malaysian conglomerate Sime Darby announced that it would sell its interest in Ramsay Sime Darby Health Care to Malaysia’s Columbia Asia Healthcare for USD1.2 billion.
In December 2023, Thailand’s WHA Corporation signed an agreement with PTT Global Chemical to purchase 50% of GC Logistics Company, strengthening its foothold in the logistics sector.
And in January, AREIT, the Philippines’ first and largest real estate investment trust (REIT), paid out PHP1.19 billion (USD20.23 million) to buy the Seda Lio hotel in El Nido, Palawan province. The acquisition was part of a bigger PHP30 billion infusion of prime commercial assets into AREIT.
“The key to a successful REIT is to constantly infuse accretive properties to ensure continued growth for stakeholders,” says Chingkay Martirez-Cruz, head of legal, chief compliance officer and assistant corporate secretary at AREIT. “This year’s infusion is the fourth property-for-share swap by AREIT since its IPO in 2020.”
Given the various regulatory approvals needed for a property-for-share swap, Martirez-Cruz says: “Building a partnership with regulators is critical; from advice on structuring deals beneficial to investors, to ensuring that acquisition timelines are met, thereby guaranteeing a steady income and dividend declarations to shareholders.”
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