Global M&A activity levels in 2019 reached USD 3.33 trillion, which is down 6.9% year on year – however this was against an exceptional year in 2018. The fourth quarter brought a rebound in deals, spurred on by the phase-one trade deal between the US and China, which was signed in mid-January 2020. So, what are the key M&A trends we should expect in Asia in 2020?
Trade War impact
The US-China Trade War brought considerable economic trouble to the APAC region. Widespread geopolitical risk has negatively impacted sentiment and as a consequence, M&A volumes and activity levels related to Asia Pacific have been affected. Despite the signing of the phase one trade deal, the trade war and with that more protectionist sentiment, is one aspect of that will continue to dominate the headlines and the full impact of the coronavirus too is yet to be seen, but we can already see delays in transactions.
Key Asia trends for 2020
Trends vary from country to country – there’s no one-size fits all analysis for Asia. Outbound M&A from China to the US is likely to remain dampened, but China intra-Asia M&A, particularly to India, should pick up and we could see some exciting activity there. Korean clients are seeking higher yields and are looking for ‘safe’ investments, and so their focus is turning more global. Likewise, in Japan, we expect to see an uptick in activity there too – following on from a positive 2019.
For investors in today’s environment, it comes down industrial logic and the fundamentals of M&A. Does it really represent an opportunity that relates to tangible results – are we going to see geographic expansion, or new customers? And this applies at the board level too. It speaks to reason that if you’re going to do a deal in a riskier environment, you need to be more prepared. At the end of the day, deals are going to continue to happen, but the ones that are able to flourish in the current environment, are those which have been carefully considered.
Raghu Narain, Head of Investment Banking in Asia Pacific at Natixis explains in further detail, his analysis in this podcast: