The Asia Pacific region cemented its position as the world’s second largest merger and acquisition (M&A) market in 2013 and outbound Chinese M&A activity is likely to increase in 2014, according to a global professional services firm.
Last year, acquirers in Asia Pacific enjoyed their best performance since the 2008 global financial crisis, outperforming the regional MSCI index by 3.5 percentage points (compared to a 0.1 percentage point underperformance in 2012).
In terms of the volume of deals completed in 2013, North America led the field with about 60 per cent of the global total, while Asia Pacific convincingly overtook Europe as the second most active M&A region with more than 140 deals worth more than US$100 million.
“Two years ago, we were talking about the Asia Pacific region starting to match Europe on M&A deal volumes, but now it has overtaken Europe by some margin,” said Massimo Borghello, director, M&A consulting – Asia Pacific at Towers Watson, which conducted a recent analysis of M&A deals globally.
“This is not because Asian companies are doing significantly more deals than before, but seemingly because European acquirers have been holding back with a notable drop off in the fourth quarter of 2013.”
The analysis, conducted in partnership with the UK-based Cass Business School, also revealed that acquirers around the world outperformed companies not involved in M&A activity by an average of 4.7 percentage points, highlighting superior performance since 2008.
“Two years ago, we were talking about the Asia Pacific region starting to match Europe on M&A deal volumes, but now it has overtaken Europe by some margin”
“The big M&A story for 2013 is share price performance of acquirers, which, in all three global regions, significantly outperformed those that did not acquire,” said Borghello.
Towers Watson also noted that Chinese companies are likely to break the Asia-Pacific mould of focusing on internal deals and increase the proportion of outbound merger and acquisition (M&A) deals in 2014 as companies outside the region become more tempting.
Mega-mergers will also see a comeback, according to the firm, which noted that the strong performance of last year’s acquirers and the significantly improved economic outlook in many countries is likely to tempt more companies into the realms of a ‘mega-merger’.
Completion of large transformational deals worth over $10 billion was notably rare in 2013 but could become popular again as major companies look to expand into new business areas with big brave acquisitions.
“2014 looks to be a year of increased optimism and opportunism in M&A but regardless of the number, value or location of deals, it is people-related issues that will continue to provide the distinction between deals that add value and deals that destroy it,” said Steve Allan, Towers Watson’s M&A practice lead in EMEA.
“Companies that regularly engage in M&A activity already recognise that successful workforce integration is both difficult to get right and crucial to the success of a deal. Less experienced acquirers will need to be alive to these success drivers if they are to take full advantage of the expected more buoyant M&A market this year.”
