Asia-Pacific (APAC) merger and acquisition (M&A) pipelines are full, according to the latest Intralinks Deal Flow Predictor report: Early-stage M&A activity in Q2 2017 increased by 26% year-over-year (YOY). At the same time, according to data from Thomson Reuters and Intralinks’ analysis, the number of announced M&A deals in APAC in Q2 2017 rose by 8% YOY. Based on this data, our independently verified predictive model forecasts that the number of announced M&A deals in APAC for the full year 2017 (FY 2017) will increase by around 11% YOY.
Almost all regions within APAC, except for Japan, are contributing to the strong growth in M&A activity, with Southeast Asia, India and Australia leading the way. Japan recorded its second consecutive quarter of declining early-stage M&A activity in Q2 2017, with the number of early-stage deals falling by 12% YOY, following on from a 7% YOY decline in Q1 2017. Based on our insights into early-stage M&A activity, the real estate, healthcare and materials sectors are predicted to lead the growth in APAC M&A announcements in H2 2017.
China is the regional superpower and the world’s largest economy based on purchasing power parity (PPP). Whether it’s a report on the slowing of its economy, the 9.6% undervaluation of its currency on a PPP basis (according to The Economist Big Mac Index), or Beijing’s reining in of outsized foreign acquisitions by its large, deal-hungry companies, China tends to dominate much of APAC’s news cycle.
That may be about to change. India, long considered an also-ran in the pace of its economic development, quietly overtook China in 2015 to become the world’s fastest-growing large economy. According to the International Monetary Fund, India’s economy is expected to grow at an average annual rate of 7.8% between 2016 and 2022, which is 1.8 percentage points per annum higher than that of China.
The reasons for this pickup in growth? The first serious economic, fiscal and monetary reforms in decades, being carried out by the government of Indian Prime Minister Narendra Modi, who was elected in 2014. These reforms are aimed at improving and modernizing India’s infrastructure and government, reducing bureaucracy, encouraging foreign investment, making it easier to do business and increasing India’s economic growth rate.
With higher economic growth comes increased M&A activity: for the past five quarters, the Intralinks Deal Flow Predictor highlighted the fact that early-stage M&A activity in India has increased faster than in any other large country. India is on track to become Asia’s new M&A powerhouse.
Ten years after the start of the global financial crisis, worldwide M&A activity continues to set new highs, supported by buoyant asset markets, a pickup in global economic growth, subdued inflation in advanced and emerging economies and historically low-interest rates that make debt financing for acquisitions cheap and readily available.
While macroeconomic and monetary conditions are fueling M&A activity, political risks remain. An escalation of the conflict between the US and North Korea, restrictions on global trade and cross-border economic integration, or increases in nationalism or protectionism, could negatively affect APAC dealmaking sentiment.
To get more regional and sector insights, and to know the future of global M&A six months ahead of anybody else, download your copy of the Intralinks Deal Flow Predictor report here.