Options in Global M&A
The Base of Asia Acquirers is Expanding
David Iwinski Jr.
Options In Global M&A
The Base of Asia Acquirers Is Expanding
For the past ten years, perhaps the biggest story in global M&A has been the emergence of China as a driving powerhouse with billions of dollars being poured annually into acquisitions all over the globe, but in no place more aggressively than in the United States. Seeking technology, brands, distribution and a domestic manufacturing base, China-driven acquisition has steadily moved from mega-transactions conducted by large state-owned enterprises to small and medium-sized businesses driven by the needs of privately-owned companies in China.
However, recent trade tensions and tariff barriers have not only created financial disincentive, but have spooked potential acquirers concerned that trade difficulties might escalate and dramatically reduce the value of American acquired properties to the Chinese enterprise. Moreover, increasing concern within China about currency risk has produced additional restrictions on the transfer of capital out of the country.
While that might lead some to believe that the appetite for international acquisitions from Asia is slowing down, rest assured that other nations in the region are happily picking up the slack. Just as China acquisition is typically driven by strategic global expansion plans, there are other nations whose economic growth and global savvy have made them eager to join this process.
Here are a few examples…
Singapore Dramatically picking up the pace on foreign acquisitions, Singapore by September of this year had announced over US$91 billion in transactions, more than double the same period in 2017. Diverse targets range from real estate to technology to engineering. During the first 9 months of this year, Singapore firms were involved in 468 transactions as buyers of foreign companies, many in the United States. Long standing as one of the most stable and financially secure locales in Asia, a great place for finance, banking and dispute resolution, Singapore is now emerging as a major player in global M&A activity.
Japan Many readers will remember a couple decades ago when Japan seemed to be buying everything in sight, but the hammer blow of the Asian financial crisis of 1997 severely tamped down their global acquisition ambitions. However, they are back with a vengeance and have been driving significantly increased deal flow since 2014. Takeda Pharmaceutical’s bid of US$62 billion for Shire Biotech is just one of many deals capping the re-emergence of Japan as a major power in global M&A. From Fujifilm acquiring Xerox, to deals in banking, financial services, technology and insurance, Japan is again a highly viable source for deal flow for firms of all sizes.
South Korea While they may not be as aggressive as some of their Asian brethren, South Korea is definitely stepping up to the plate in terms of global M&A. In late 2017, a group of 42 companies committed to investment in the United States in excess of US$17 billion by year 2021. Deals already in play include Lotte Chemical investing US$3 billion in a petrochemical facility in Louisiana, Hankook Tire building a new factory in Clarksville, Tennessee with US$800 million invested and SK Innovation acquiring Dow Chemical’s ethylene acryl business in Texas for US$370 million. South Korean firms tend to be more focused on physical infrastructure and manufacturing than pure technology plays but are most definitely interested in production facilities coupled with deep patent positions.
There are many options to consider and many alternatives when looking for acquirers. Sometimes the best place to make a deal is within the borders of the United States, but often, greater strategic value can be gained by looking offshore. While China was, for over a decade, an extraordinarily strong player, there are now additional Asian location options to consider when seeking to maximize value – especially in a global market hungry for high quality firms with great brands, innovative technology, solid distribution models and efficient world-class manufacturing facilities. Happy hunting!