Cross-Border M&A in Asia-Pacific: A Recovery

By Kane Wu and Yantoultra Ngui
HONG KONG/SINGAPORE (Reuters)

Cross-border mergers and acquisitions (M&A) in the Asia-Pacific region have seen a significant recovery this year, particularly in Japan, as businesses adapt to higher interest rates to pursue new growth opportunities.

According to LSEG data, the total announced value of cross-border M&A deals rose by 25% year-on-year to $286 billion as of September 30, with about 80% of these transactions involving entities outside the region.

Andre Gan, a partner at Wong & Partners, noted that the increase in cross-border transactions correlates with the return of political stability in several markets and growing demand for investments as businesses adjust to new financial conditions.

Overall, Asia’s M&A activity totaled $622 billion in the first nine months of the year, a slight decline of 0.2% from the same period in 2023.

Mega-Deals Drive Recovery
Several high-profile deals have fueled this recovery, including the $38.5 billion takeover bid by Canadian company Alimentation Couche-Tard for Japanese convenience store chain Seven & i Holdings, marking the largest announced M&A deal globally this year.

Additionally, the Australian REA Group is aggressively pursuing British real estate portal Rightmove, increasing its bid to $8.3 billion after previous offers were rejected.

Japan’s Role in M&A Growth
Bankers predict Japan will lead the region’s multibillion-dollar deals, buoyed by relaxed corporate governance that makes public companies more amenable to takeovers. The inbound M&A in Japan has surged by more than 16-fold this year, reaching a record $74 billion, while outbound transactions have risen by 49% to $50 billion.

Hines, a Texas-based real estate investor with $93 billion in assets, is actively seeking global opportunities, including in Asia, and has made some acquisitions in Japan and Singapore.

In Southeast Asia, cross-border transactions are also gaining momentum. For instance, German insurer Allianz announced plans to acquire a majority stake in Singapore’s Income Insurance for about $1.6 billion to enhance its presence in Asia.

Looking ahead, Rohit Satsangi, Deutsche Bank’s co-head of M&A for Asia Pacific, forecasts that 50% of the APAC M&A pipeline will consist of global cross-border transactions. He also anticipates an increase in outbound activity from Chinese state-owned companies searching for renewable and natural resources acquisitions worldwide.

While China’s outbound M&A deals totaled $14 billion, reflecting an 8% decline year-on-year, they remain near the lowest levels seen in the past decade, according to LSEG data.

Gan of Wong & Partners is optimistic about the overall outlook for M&A in the region, expecting improvements, including for domestic deals. He predicts that easing interest rates by the U.S. Fed and political stability will enhance M&A activity as we approach 2025 and 2026.

($1 = 1.2801 Singapore dollars)