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China To Continue Leading M&A Market In ASEAN Region

The private sector players in China are forecasted to continue their lead in mergers and acquisitions in the Asian region in 2015. The past year saw record deals in finance, technology and consumer retail mergers and this trend is set to continue. 

China To Continue Leading M&A Market In ASEAN Region

A number of private companies are participating in acquisitions, an impressive transition from what was largely a state-dominated affair. Some commendable companies that have entered into impressive M&A deals include HEFFX, a leading merger and acquisition broker, Haitong Securities and Fosun International, just to mention a few. 

The financial sector is anticipating greater merger and acquisition trends in 2015 as more and more private companies invest in equity markets against a backdrop of market reforms in Beijing, the second largest economy in the world.  

In the later part of 2014, M&A deals in the ASEAN region spiked to a record 48%, which accounts to $80.22 billion according to Reuters. In the financial services sector, Morgan Stanley, Goldman Sachs and Citigroup are the leading funders for private dealmakers in the region.

In 2014, private investors in China led the rankings, with Chinese dealmakers accounting for $353 billion. An impressive example of the unstoppable trends set by the Chinese is the acquisition of Club Mediterranee by Fosun at a value of $1.15 billion.

According to Rhit Chatterji of JP Morgan’s Asia M&A arm, “China is coming of age in terms of the types of outbound acquirers.” Historically, most Chinese acquirers were interested in the natural resources sector but investors are now widening their scope and their portfolio.

Many investment banks are expecting reforms in the larger Asia-Pacific area including Australia as the Victoria and New South Wales governments look to sell up to $21.2 billion in power assets in 2015. Privatization of state owned enterprises in China is also expected to increase the volume of mergers and acquisitions this year. Bankers are also anticipating private equity firms to spend the $130 billion worth of capital to increase acquisitions.

In addition to the lucrative financial sector, retail and technology acquisitions, the oil and metal industry offers an alternative source of deals. Bankers are betting on Asian and specifically Chinese companies to acquire poor performing companies in the mineral sector region, thereby offering banks financing and M&A funding opportunities.

J.P Morgan's Chatterji further noted that, ‘There are many leveraged balance sheets in the commodities areas. Many company companies that are committed to capex are no longer able to follow though without equity support and this presents opportunities (for banks).”

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