New Delhi: China and India are Asia’s top two targets for merger and acquisitions in the financial services space, due to underlying economic growth conditions and interest in the two fastest growing economies of the world, a survey says.
“China and India still remain the top two targets for M&A in the region... and interest in India has increased to 39% from 36%,” PricewaterhouseCoopers said in an annual survey conducted with the Economist Intelligence Unit.
The survey of 230 executives in Asia revealed that the financial services sector is expected to continue witnessing M&A deals in the next five years, which are now expanding into other related sectors.
“M&A activity is now broadening as sectors, such as insurance and trusts have also begun to open up,” it said.
Meanwhile, in China interest in M&A activity slightly declined to 47.3% from 52% last year.
Taiwan, Pakistan and Vietnam are also fast emerging as growing markets of M&A activity after opening up of both regulatory and vendor perspective.
According to the findings of ‘Financial Services M&A: Going for growth in Asia´, the financial services sector is expected to continue to undergo major M&A activity over the next five years buoyed by high level of confidence in the economy.
Expectations are slightly up on the previous year with 74% of survey respondents predicting major M&A activity in the coming five years against just over 68% in 2006.
”In India, regulatory restrictions, a paucity of suitable targets and high pricing of M&A deals are the key challenges being faced by financial services companies seeking acquisitions,“ PWC leader of advisory services Ashwani Puri said.
Regulatory protectionism and the sheer diversity of the region continue to present further barriers to regionalisation and this continues to hamper the development of regional platforms and make cross-border deals difficult, he added.
The value of M&A totalled $64 billion in 2006 as compared to $37 billion in 2005.
High level of economic growth across the region would continue to attract investment, boosting demand for a limited supply of quality assets, which may lead to an increased risk of overpaying.
High pricing was identified by 50% of respondents in the survey as the primary barrier to doing deals.
The rapidly evolving markets and significant growth factored into deal prices make it very easy to overpay.