Almost 90% of leading Asian companies want to expand internationally through mergers and acquisitions, according to a regional corporate survey by JP Morgan.
The US bank surveyed C-suite executives at 55 unnamed companies across a range of industries in nine Asian markets. Some 40% of the companies questioned have a market value of $10 billion or more. Another 20% are privately owned.
The results of the survey show that Asia's companies are “optimistic and eager to grow through acquisitions,” JP Morgan said, underlining just how important the region is becoming in global deal-making terms.
“If you look at M&A volumes this year, 50% was from North America, while Asia made up over 25%,” Chris Ventresca, co-head of global M&A at JP Morgan, told FinanceAsia. “Asia has become a big participant in global M&A.”
Eighty-eight percent of respondents identified themselves as net buyers versus just 10% stating they would be net sellers.
The Asian companies surveyed also named changing consumption patterns, international expansion, and corporate consolidation as the biggest catalysts for M&A.
Hernan Cristerna, the US bank’s other co-head of global M&A, noted that once-vibrant growth was slowing in Asia, impacting the performance of companies and their share valuations.
“Financial engineering such as share buybacks don’t get to the heart of the issue [of slowing growth],” he told FinanceAsia. “Companies realise they need something more industrialised to grow.”
Changing dynamic
Ventresca noted that M&A volumes in 2007, the busiest year on record for global M&A, had concentrated a great deal on commodities as China's state-owned enterprises in particular sought to buy up international resources to support the country’s booming economy.
However, with global M&A in 2015 on course to beat the previous annual record, the dynamic in Asia at least is changing.
“In 2015 we are seeing more strategic transactions in Asia, with companies seeking to acquire in order to better round out their businesses, gain technology or acquire capabilities higher up the skill chain,” he said.
"One of the main drivers for the outbound activity is Asia companies’ increased ability to create synergies by integrating global technology and brands into their home market," added John Hall, co-head of Asia-Pacific M&A for JP Morgan.
“The need to move up the value-chain and possess more [intellectual property] will result in more cross-border acquisitions, specifically by the Chinese. The activity in the semiconductor sector is a great example.”
Earlier in the year a consortium led by Jiangsu Changjiang Electronics Technology acquired Singapore semiconductor company STATS Chippac, while China's Tsinghua has attempted to acquire US-listed Micron -- unsuccessfully so far.
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