Chinese insurer Ping An is spending €2.15 billion (Rs13,653 crore) to buy half the asset management business of Belgian-Dutch bank Fortis. China’s Sinosteel has gone hostile in its bid for Aussie miner Midwest. Asian mergers and acquisitions (M&A) scene is hot—at a time when it’s no fun being an M&A banker in New York or London. Bankers twiddling their thumbs in Western financial capitals might consider booking tickets to Asia.
Sure, there are some big deals in the West—Microsoft’s bid for Yahoo, for instance. But the leveraged buyouts that fuelled the boom have disappeared. In the US and Europe, the value of announced deals has declined so far this year by 49% and 14%, respectively, against last year, according to Dealogic. Yet, deals involving companies in the Asia-Pacific region have risen 7% and are on track to break last year’s record. Of course, they still account for a smaller slice of the overall pie, not least because market capitalizations in the region—with the exception of China’s arguably overvalued companies—are lower.
But the growth potential is sufficient to make Asian M&A one of the few bright spots in investment banking. Most Wall Street firms operating in the region say they will raise their ranks of country specialists, merger experts and the folks covering specific industries. Many equate their Asian build-ups to the 1990s in Europe, when the dissolution of trade barriers spurred consolidation. In Asia, the process won’t be identical, but it shares many similar features. There’s still scope for the creation of national industry champions. Taiwan still counts some three dozen banks operating in the market. That number could shrink substantially to a few large institutions over the next few years.
And many companies in the region are flush with cash. Chinese firms raised some $150 billion through Shanghai and Hong Kong stock offerings last year. For the first time, many of them see international shopping as a strategic priority. For others, expanding abroad is critical to doing battle with larger global rivals. Sinosteel last week bid Australian $1.2 billion (Rs4,506 crore) for Midwest. Sinosteel felt so strongly it needed to own Midwest, it went hostile. That’s the kind of transaction that should get bored bankers in the West considering their strategic alternatives in the East.