Asia Pacific Growing in Strength Against Volatile US and Europe
Although M&A activity globally is looking like it is recovering this year, the US and Europe struggled during the global economic crisis, while the Asian market looked much less ruffled.
Ongoing instability is still very much on the minds of dealmakers in the West, who are remaining cautious despite an urge for growth that has built up over the recession years. However, there seems to be no such caution among firms focused on expanding into what is arguably the most exciting business region on Earth—Asia Pacific.
In Australia, major deals, particularly in the resources and agriculture industries, have led to the value of Australian mergers and acquisitions rising above AUD$15 billion. Analysts based in Australia tend to predict that the trend for M&A activity will continue. Tony Damian, an M&A partner at law firm Freehills, said, “There has been volatility—but volatility in one form or another has been around for years. Through all of that we have not really seen a decrease in interest in Australian targets or the propensity to do deals.”
Australia has enjoyed a strong currency and had endured far fewer general effects from the global economic crisis than many other regions of the world. Some of its major brands, including the giant shopping mall chain Westfield, have gone global over the past few years—using the home nation’s strength to their advantage.
Mr. Damian added that he expects cross-border deals from Australian players to grow in frequency, particularly towards Asia, on which so much attention is being focused at the moment. He said, “There are still industries where there is room for domestic growth, but in some industries, especially with Asia on the doorstep, it’s a natural decision to look overseas and I think we will continue to see more of that.”
The influence that China’s growing demand for raw materials is having on M&A in the mining sector is also benefiting activity in Australasia. Some of its initial offers to take over mining firms in the region were rejected, but China is expected to become more price aware with experience and its completed deal activity could rise in the second half of the year as a result.
All the indicators suggest that attention is firmly fixed on Asia as the centre for growth, with Hong Kong forming the epicentre. Legal firms are pouring into the continent to help facilitate M&A deals, initial public offerings and other activities that indicate the market is extremely healthy. David Eich, Kirkland & Ellis’ Hong Kong senior partner, is just one of the many legal experts who are working within the market. He told Legal Week: “The buzz out here is like nowhere else on Earth. I’m incredibly fired up. There’s so much upside in Asia right now for firms doing big corporate deals.”
Asian firms are dominating global IPO activity at the moment, with their flotations accounting for 65 per cent of global proceeds between 2006 and 2010—illustrating the region’s strength even during the darkest recession years. Mergermarket statistics show that mergers and acquisitions activity in Asia has also stood up to economic volatility much more effectively than in the US and Europe.
US legal firms see the same potential for growth and expansion in Hong Kong as they saw in London 15 years ago and are using the same strategies to break into the market. It seems that the balance of power could indeed be shifting eastwards—when it comes to M&A, IPO activity and prospective growth.
