The base of Asia acquirers is expanding

For the past 10 years, perhaps the biggest story in global M&A has been the emergence of China, as it pours billions of dollars annually into acquisitions all over the globe, but in no place more aggressively than the United States.

Seeking technology, brands, distribution and a domestic manufacturing base, China-driven acquisition has moved from mega-transactions conducted by large state-owned enterprises to small and midsize businesses driven by the needs of private companies in China.

Recent trade tensions and tariff barriers, however, have created financial disincentive and spooked potential acquirers concerned that trade difficulties might escalate and dramatically reduce the value of American-acquired properties. 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 the appetite for international acquisitions from Asia is slowing down, other nations in the region are happily picking up the slack. Here are a few examples:

Singapore — By September, Singapore had announced over $91 billion in transactions, more than double the same period in 2017. Targets range from real estate to technology to engineering. During the first nine months of 2018, Singapore firms were involved in 468 transactions as buyers of foreign companies, many in the U.S.

As one of the most stable and financially secure locales in Asia, Singapore is emerging as a major player in global M&A activity.

Japan — A couple of decades ago Japan seemed to be buying everything in sight, but the Asian financial crisis of 1997 severely tamped down its global acquisition ambitions. However, Japan is back with significantly increased deal flow since 2014. Takeda Pharmaceutical’s bid of $62 billion for Shire is just one example of the re-emergence of Japan as a major power.

With 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 not as aggressive as some, South Korea is stepping up to the plate. In late 2017, a group of 42 companies committed to U.S. investment in excess of $17 billion by 2021. Deals already in play include Lotte Chemical investing $3 billion in a petrochemical facility in Louisiana, Hankook Tire building a new factory in Tennessee with $800 million invested, and SK Innovation acquiring Dow Chemical’s ethylene acryl business in Texas for $370 million.

South Korean firms tend to focus on physical infrastructure and manufacturing more than pure technology plays, but they’re definitely interested in production facilities with deep patent positions.

With many alternatives, sometimes the best place to make a deal is within the borders of the U.S., but often, greater strategic value can be gained by looking offshore.

While China was, for over a decade, a 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.

 

David Iwinski Jr. is the managing director of Blue Water Growth. A global business consulting firm with extensive experience and expertise in Asia, Blue Water Growth services include merger and acquisition guidance, private capital solutions, product distribution, production outsourcing and a wide variety of business advisory services for its Western and Asian clients.