By Lawrence White
Asia-Pacific takeover volumes hit a record in the first half of 2014, driven by a surge in dealmaking in Australia and bankers expect the buying spree from China's private tech companies and reform of the state sector to boost second-half activity.
Announced M&A volume in the Asia-Pacific region in the first half rose 67 percent from a year ago to $378 billion, preliminary data from Thomson Reuters data show, the highest volume on record for the equivalent period. The record comes amid a boom in global M&A as improving CEO confidence and strong cash positions held by corporations drove a spate of mega-deals in pharmaceutical industries.
"This year has seen an increase in risk appetite driving a broader mix of real M&A deals, across India, Australia and China and across industry sectors, which makes us very optimistic for the rest of the year," said Richard Campbell-Breeden, chairman of the M&A group for Asia-Pacific at Goldman Sachs Group.
Australasia saw 19 deals worth more than $1 billion, compared with just two in the same period last year, with the real estate, industrials, consumer and healthcare sectors particularly active amid improving market conditions.
"The very significant rebound in deal activity in Australia is the result of a release of pent-up demand, the fact that valuations have stabilised, and greater boardroom confidence," said Colin Banfield, head of M&A Asia-Pacific at Citigroup.
Boutique investment bank Somerley Ltd snatched the top spot for all announced Asia-Pacific mergers, almost solely on the strength of its advisory work for the massive $36 billion purchase of assets by China's CITIC Pacific Ltd from its state-owned parent.
That deal forms part of the broader theme of China's state-owned enterprises beginning to restructure amid slowing growth at home and the government's desire for consolidation in key sectors.
The high variance in fees paid for deals in Asia means there is often little correlation between a bank's ranking on the tables for volume of deals done and for fees earned, say M&A bankers in the region.
Goldman Sachs Group Inc claimed the top spot for fees earned from Asia-Pacific M&A in the first half of the year, according to estimated data from Thomson Reuters and Freeman Consulting.
China tech spree
China's Internet giants have been on a buying spree this year. Top deals include Alibaba Group Holding Ltd's $1.2 billion investment in the merged video platform Youku Tudou, and JD.com Inc's almost $2 billion investment in Alibaba rival Tencent Holdings.
"The slew of deals in the China tech sector is a natural result of the need for consolidation as the leading players seek to aggregate content for China's Internet users," said Citi's Banfield.
In addition to being Asia's top M&A fee-winner, Goldman Sachs also tops the league tables for equity capital markets, ahead of UBS and Citi. But stock volatility took a toll on ECM volumes, with Asia-Pacific tally falling marginally to $87.5 billion in the first half, from $89.3 billion from a year ago.
Asia will miss out, however, on the year's likely plum equity deal as Alibaba abandoned plans to list in Hong Kong in favour of a U.S. IPO later this year.
"It was a disappointing outcome for Hong Kong because Alibaba's listing there would have had a gravity effect, pulling more companies to the market," said Fan Bao, chairman and chief executive officer of boutique investment bank China Renaissance.
