{"id":1539,"date":"2016-04-26T13:52:04","date_gmt":"2016-04-26T13:52:04","guid":{"rendered":"http:\/\/www.southasiantimes.com.au\/?p=1539"},"modified":"2016-04-26T13:52:04","modified_gmt":"2016-04-26T13:52:04","slug":"ma-deals-southeast-asia-target-of-asian-investors","status":"publish","type":"post","link":"https:\/\/www.southasiantimes.com.au\/?p=1539","title":{"rendered":"M&A deals: Southeast Asia target of Asian investors"},"content":{"rendered":"
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\"sene\"<\/a>As global trade continues to slow, the appetite for mergers and acquisitions is providing some cross-border compensation, but is shifting direction towards deals in regions closer to home, with Southeast Asia becoming the growing focus of Asian \u2014 including Australian \u2014 investors.<\/p>\n<\/div>\n

Law firm Herbert Smith Freehills interviewed 700 senior executives of firms with more than $1 billion annual turnover on their M&A plans \u2014 with two thirds of those operating in the Asia-Pacific region citing neighbouring countries as their prime acquisition targets.<\/p>\n

Nicola Yeomans, an Australian partner who is based in Singapore, said it was important to note that this region was now \u201ca strong originator of deals\u201d rather than an M&A destination.<\/p>\n

Of the Australian executives surveyed, 75 per cent said they were planning to make at least one acquisition over the next three years. But two-thirds of the Australians said this would not be a transformative deal that could boost overall revenue by more than 5 per cent.<\/p>\n

The biggest group \u2014 27 per cent \u2014 have domestic targets, with the second largest group \u2014 23 per cent \u2014 focusing on Southeast Asia. Their top strategic driver is to boost market share.<\/p>\n

Ms Yeomans said: \u201cThe historical assumption that Australia, as a target, is a commodity play is being tested, with acquisitions in, for instance, technologically innovative and agriculture companies bringing good news of diversification.\u201d<\/p>\n

Globally, the US remains the biggest target for M&A plans, with western Europe second, ahead of Southeast Asia.<\/p>\n

Most of the Chinese executives surveyed \u2014 60 per cent \u2014 anticipated making two or more acquisitions over the next three years, with Southeast Asia being targeted by 47 per cent, followed by Latin America with 17 per cent.<\/p>\n

Southeast Asian deals, Ms Yeomans said, tended to involve state-owned enterprises, to be determined by an auction process, and to feature very tight time\u00adtables.<\/p>\n

She said the number of deals coming out of the US has fallen; the Chinese M&A appetite hasn\u2019t soared but has stepped up proportionately.<\/p>\n

Leading Beijing-based economist Arthur Kroeber, founder of Gavekal Dragonomics, said recently that \u201cthe secular fact is that China is simply gaining the significance in global M&A that would be normal for an economy of its size and financial heft\u201d.<\/p>\n

\u201cPeople are paying attention not because the numbers are abnormally big but because China is the new kid on the block. Unfamiliarity breeds curiosity.\u201d<\/p>\n

Thanks to its accumulated large trade surpluses, he said, China was \u201cwell on its way to becoming the world\u2019s biggest net creditor, following Japan\u2019s path in the late 1980s\u201d. And most likely, he added, \u201cthese overconfident newbies will have a tendency to overpay, just as Japanese investors did in the 1980s and Chinese state firms did during the late lamented resources boom. It is a good time to be a seller\u201d.<\/p>\n

More of the Chinese outbound investments were now coming from private companies, Ms Yeomans said.<\/p>\n

Within the Asia-Pacific region, antitrust regulation was cited \u2014 by 35 per cent of respondents \u2014 as the chief reason for the regulatory failure of deals, followed by environmental concerns, with 23 per cent, and labour issues with 17 per cent.<\/p>\n

A third said that legal and regulatory factors had been the most challenging feature of deals in which they had recently been involved.<\/p>\n

Ms Yeomans said Southeast Asia \u201coffers a relatively untapped market of more than 600 million consumers\u201d. India is also becoming a centre of acquisition targets, with \u201cpeople having a greater level of comfort than previously with the Indian levels of growth\u201d \u2014 now the strongest in the world.<\/p>\n

Those investing overseas, she said, were generally looking for growth and for a lower cost of doing business, as well as a stepped-up market share.<\/p>\n

While private equity activity remains substantial, Ms Yeomans said, most successful deals tend to come from corporates in the same industry as the target, building out their own portfolios.<\/p>\n

Source: The Australian<\/p>\n","protected":false},"excerpt":{"rendered":"

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