M&A survey part 2: focus on FIG

In the second part of FinanceAsia’s online survey, in association with Clifford Chance, readers gave their views on which sectors were likely to be the focus of M&A activity in the coming months.

For results from part one of the survey, click this link.

FIG demand

Survey respondents viewed financial institutions groups as being the most popular sector for M&A activity. In total 58.2% of voters answering a question on how busy FIG would be for M&A considered it Asia’s busiest sector.

It’s a view Roger Denny, partner and head of M&A for Asia-Pacific at Clifford Chance, agrees with and it is reinforced by recent actions of Chinese and Japanese insurers.

In Japan, Mitsui Sumitomo bought into the UK’s Amlin for £3.5 billion ($5.27 billion) in September, Nippon Life purchased 80% of National Australia Bank’s insurance arm for $1.7 billion in October, and Sumitomo Life bought US insurer Symetra Financial for $3.8 billion in August.

Meanwhile, China’s Anbang Insurance has been busy buying the Waldorf Astoria Hotel for $1.95 billion, paying C$110 million ($82.4 million) for a Toronto office tower, and securing Fidelity & Guaranty Life for about $1.57 billion in November. Plus Fosun International, the investment arm of a Chinese conglomerate that has since been in the news over the detention of its chairman, purchased Hauck & Aufhauser, a private bank in Germany, and acquired the remaining 80% of US insurer Ironshore it didn’t own for $1.84 billion in May.

China’s banks have been less active but Denny believes this could change as they gradually seek regional exposure. “They have been looking at targets in the region and I think they will do deals, but on a careful, selective basis,” he said.

Tech drive

The second-most popular sector highlighted in the survey is technology, media, and telecommunications, at 39.4%. China again figures highly.

According to Joe Gallagher, head of Asia-Pacific M&A at Credit Suisse, there are two key themes behind this: internet-connected devices and semiconductors, and the consolidation of internet-based businesses.

“We’ve seen incumbents seeking to strengthen their positions in China, to ensure they can offer customers more options in their respective ecosystems. I think that will continue, and the companies are increasingly going to look abroad to other parts of Asia, to diversify for additional growth,” he said.

E-commerce and financial technology companies have proven particularly aggressive. A prominent example: the all-stock merger of group-buying platform Meituan and restaurant review website Dianping to create China’s largest online-to-offline platform.

The digital business trend could impact other sectors too. Bruce Delteil of consultants Accenture Strategy told FinanceAsia that digital disruptors, or small e-commerce and online delivery companies, are gradually eating into the market share of traditional bricks and mortar players.

“Some companies will understand this [impact of digital services and new means of operating] on their businesses faster than others,” he said. “What will happen to those that are slow? It could create further rounds of M&A [as the companies slowest to adapt lose market share and are consumed].”

Healthcare was the third-most popular sector identified by the survey for M&A, with local and international players looking to China's healthcare market for opportunities.

The global industry has seen consolidation and Asia appeals to many international companies, due to the region’s large populations, rising incomes levels, and the increasing desire of governments to expand health safety nets.

“M&A deal sizes here are unlikely to be quite the headline-grabbing sizes that we have seen in the US and Europe, but this is an important strategic area for most companies,” said Denny.

About the survey respondents

The outlook