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M&A activity in APAC to struggle in 2019

Mergers and acquisitions (M&A) activity in the Asia Pacific region is expected to be silent in the on-going year as the international M&A market continues to grapple with the present conditions, a global report released by Willis Towers Watson in collaboration with Cass Business School revealed.

The report which investigated the completed M&A transactions valued at least USD100 million highlighted how acquirers in the Asia-Pacific region registered the lowest annual performance in the last year across all regions with an under-performance of 17 percentage points (pp) below the regional Morgan Stanley Capital International (MSCI) Index.

Massimo Borghello, head of corporate M&As for APAC region at Willis Towers Watson, stated that the market stress that considered last year will persist with the current trade and tariff negotiations, increasing regulatory unpredictability, and the current trade and tariff negotiations.

The last year witnessed an overall 17 mega deals worth more than USD10 billion, which under-performed the market by 14.55pp. M&A activity in Singapore slumped 30.7 per cent on a year-on-year basis to USD66.2 billion in the last year with the average closing deal sizes touching USD97.7 million, as per a report by Refinitiv, the financial and business risk arm of Thomson Reuters.

Willis Towers Watson also highlighted that the company anticipate to witness an international slump in the number of international deals because of regulatory constraints driven by a rising trend towards protectionism. This will result in a more defensive strategy of domestic consolidation for which some countries will be better prepared.

Even as the report highlighted how the United States domestic market has conventionally shown itself to be extremely strong, it noted how Korean and Japanese acquirers have increasingly been looking to take advantage of the gap left by the withdrawal in Chinese investment into the United States that could partly counterbalance diminishing volumes.

Provided that the strategic necessity for deals remains robust, deal activity will continue amid the international and economic uncertainty, the report highlighted.

The slowdown in the growth of emerging markets, shifting consumer behavior, record cash reserves, and technology disruption will propel firms to get into the merger and acquisitions market, Borghello stated adding that with a large number of targets looking more expensive than they were during the earlier merger and acquisition peaks, there has never been a better time for decision makers to focus on the selection of target, diligence, and execution prior to jumping into a deal if they are to provide themselves the best chance of success.