Market Spotlight: Pivoting towards Southeast Asia

By Desmond Chua, Head of Region, APAC, Datasite

China, undoubtedly, remains the dominant player in M&A activity in APAC. Given the country’s incredible GDP growth rates through early 2021, that position is unlikely to change any time soon. With that being said, there are various factors at play that may see other parts of the region benefit greatly in the near term and drive dealmaking there.

Through most of our current era of globalization that took off in the final decade of the previous century, China was the principal benefactor as advanced economies from around the globe looked to it as the ‘factory of the world’.

Though still integral to many globalized processes, China’s maturing economy is now pivoting more towards serving its domestic market. This may open opportunities for other countries, such as high-growth Southeast Asian economies like Vietnam and the Philippines, to pick up some slack.

M&A influenced by emerging Southeast Asian supply chains

Also of note is the challenging geopolitical context and the impact of Sino-American (and, albeit to a lesser extent, Sino-European) antagonism. In light of this contentious political situation, companies are already reassessing how their global supply chains are oriented.

With some level of decoupling from China likely, Southeast Asia’s prospects are brightening. This is aided greatly by the region’s relatively lower asset valuations and borrowing costs, as well as the general burgeoning of M&A sentiment globally post-pandemic.

Singapore, besides its reputation as a stable and company-friendly Southeast Asian hub for corporates, is home to many innovative enterprises. Over the last few years, emerging economies like Vietnam have opened to foreign investment and improved their capacity for manufacturing. Malaysia and the Philippines feature strong information technology and communications skills that would appeal to multinationals.

Dealmakers with a hearty appetite and international mindset, particularly cash-rich players from the US and Europe, will find no shortage of openings in this markedly diverse subregion.