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SE Asia, private equity deals fuel Asia’s M&A boom

Asian merger and acquisition (M&A) activity surged to its second-highest level ever for a first half as Southeast Asian and private-equity deals hit records, and bankers expect the strong momentum to be maintained for the rest of the year.

Announced deals involving Asian companies came to US$707.7 billion (RM2.9 trillion) in January – June, up 75% from the same period a year earlier and not far off the record of US$758.6 billion logged in the first half of 2018, Refinitiv data showed.

Southeast Asia deals jumped 83% to a record US$124.8 billion driven by blockbuster transactions including ride – hailing giant Grab’s US$40 billion merger with US special-purpose acquisition company (SPAC) Altimeter Growth Corp.

Bankers expect Southeast Asia to remain a big focus for deal making.

“You still haven’t seen capex demand come through because the Southeast Asian region is still kind of nascent in the recovery but you will start to see this re-emerging alongside refinancing and consolidation and M&A demand,“ said Amit Khattar, head of investment bank (Asia Pacific) at Deutsche Bank.

He expects M&A in digital infrastructure such as data centres, telecommunication towers, and the consumer sector, as well as real estate transactions, particularly in Singapore, as companies reassess office markets.

Other chunky deals in Southeast Asia included the US$18 billion merger of Grab’s Indonesian rival Gojek with local e-commerce firm Tokopedia, and a US$15 billion merger of the units of Malaysian telecoms firm Axiata Group and Norway’s Telenor.

Private equity – backed deals more than doubled to a record US$102 billion.

Asia – focused PE funds raised US$80.5 billion as of June 25, up 59% from a year ago and the most in two years, according to data provider Preqin. Dry powder in the region hit a new high of US$384.9 billion in June.

PE deals were also fuelled by banks’ improved lending appetite as many businesses across the region rebounded from last year’s pandemic-induced slump.

Acquisition-related financing in the region climbed 16% to US$57 billion as of June 25, Dealogic data showed.

PE firms swarmed into auctions of assets such as Hong Kong-based mattress maker King Koil and the China unit of drug maker Mundipharma, which is owned by the billionaire American Sackler family.

The sale of Reckitt Benckiser Group’s China baby formula business was another example, with Primavera Capital Group emerging victorious over a bevy of rivals that included Sequoia Capital, KKR and Carlyle Group.

SPAC-related transactions slowed as regulators tightened oversight, but bankers are hopeful that many discussions about so – called de – spac deals, when SPACs merge with target firms, will lead to transactions over the coming months.

– Reuters