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M&A value dips 5%, volumes fall by 17% in 2008

Mergers and acquisition (M&A) activity in the Asia Pacific region did not escape unscathed from the effects of global financial crisis that originated in the US. According to a study by ICICI Bank Global Investment Banking Group, overall M&A value dipped by 5% while deal volumes fell by almost 17% during 2008.

During the year, Greater China dominated the M&A scene, closely followed by Australia, Japan and Hong Kong. Of the overall deals done in Asia-Pacific, China accounted for over 22% deals in the Asia-Pac region. Deal value for the region jumped from $101 billion in 2007 to $155 billion in 2008, making up more than 39% of the total deal value in Asia-Pacific. Indonesia also posted a strong gain, nearly quadrupling ts deal value to $19 billion. However, Japan (accounting for over 15% of overall deals), Australia (17%), India (6%) and Malaysia (1.5%) saw marked declines in deal values.

While impact of the economic slowdown can be seen across the globe, the conservative nature of Asia-Pacific companies, provided a very different backdrop to the regional M&A picture for 2008. Governmental bailouts of banks, which largely took place in Europe and North America and even extended into the US auto industry towards the end of the year, were nowhere to be seen among the top deals in the region, the ICICI Bank study said.

Despite the lack of mega-bailouts in the region, the consolidation in the financial services sector picked up steam much like the rest of the world. Deal value in the sector jumped from $78 billion in 2007 to more than $103 billion in 2008, making up more than a quarter of the total M&A value in the region. Figures for TMT deals, made up almost 19% of total M&A value across all industries, the Energy, Mining & Utilities sector, benefiting from sky-high commodity prices in the first half of 2008, also saw an increase in deal value to $75 billion.

“Need for new technology, market expansion are some of the key drivers for corporates to opt for inorganic strategy. If we look at the deals in second half of 2008, it shows that big deals have slowed down largely on account of global economic outlook and tough leveraged financing,” said Hemant Vora, General Manager, ICICI Bank Global Investment Banking Group. With 17 deals, ICICI has been ranked 20 in the Asia-Pacific (ex-Japan) financial advisors' league tables.

With respect to India, the region witnessed M&A totalling to about $ 2.5 trillion, logging a decline of 39% over 2007 due to global economic crisis. Total value of outbound deals during 2008 was $13.55 billion. Outbound deals of value greater than $100 million accounted for 84% of the total outbound deals during the year. According to ICICI Bank, global M&A is expected to increase by 20% during the current year.

“We are closely working with various corporates both in manufacturing as well as service sector on their in-organic strategy. While the mega out-bound deals may have come down relatively, the interest in mid-market corporates continues to be high,” Mr Vora added.
Source: Economic Times

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