Deal-making activity picking up in Asia amid record cash holdings
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Lower interest rates, pro-business deregulation, tax policies and record cash holdings by investors will propel deal flow in Asia.
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SINGAPORE – Deal-making activity is picking up in Asia, with foreign companies eyeing key sectors such as energy and technology for potential mergers and acquisitions (M&A).
Lower interest rates, pro-business deregulation, tax policies and record cash holdings by investors will drive deal flow.
Global law firm Norton Rose Fulbright (NRF) said the significant growth in deal-making activity in Asia in the last months of 2024 is expected to continue into 2025.
“While geopolitical tensions continue, easing of inflation and cheaper financing coupled with pent-up demand and the need for investment in key sectors are expected to lead to increases in deal-making activity,” it noted.
Inflation across Asia generally eased in 2024, accompanied by interest rate cuts by central banks.
Lower borrowing costs make transactions more attractive and feasible for potential buyers.
The subdued M&A environment since 2022 has created pent-up demand for strategic acquisitions and investments, NRF said.
As economic conditions improve, this latent demand could translate into greater activity, particularly in the technology and energy industries.
Other favourable trends include the easing of regulations by some Asian countries as they adopt a friendlier stance towards foreign direct investments.
NRF has seen foreign investors entering joint ventures with local partners to leverage their expertise and reduce concerns about regulatory hurdles.
M&A activity in the region’s energy sector is driven by a growing emphasis on renewable energy across South-east Asian nations, the law firm added.
For example, Cambodia is targeting 70 per cent dependence on renewables by 2030, and the Philippines has amended its rules to allow 100 per cent foreign ownership of renewable energy projects.
Others like Vietnam and Taiwan are seeing substantial investments in offshore wind projects, a trend likely to spread to other South-east Asian countries, NRF said.
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The region’s hunger for digital transformation, as well as new products and services in the technology space, will continue to drive M&A.
Governments across South-east Asia are also fostering a positive environment for artificial intelligence (AI) development, as seen in initiatives like Singapore’s National AI Strategy 2.0
Many Asian countries are focusing on developing robust digital infrastructure, which is also likely to attract significant investments.
The growing middle class in Asia will drive investments in health and insurance-related technology companies, NRF said.
Global consultancy Bain & Company also expects the global M&A market to pick up in 2025 as the two biggest inhibitors – rising interest rates and regulatory challenges – will ease.
“In 2025, strategic dealmakers will look beyond near-term swings in market momentum to find the right deals to be competitive, profitable and enable sustainable growth,” it said.
It noted that generative AI, automation, renewable energy and quantum computing are just a few of the technologies that companies will need to build or buy to stay competitive.
Bain’s study of M&A across 12 industries and 10 regions found that most industries recovered in 2024 from the downturn that began in 2022.
Energy and natural resources led the pack as a wave of consolidation prompted more than 10 mega deals valued at greater than US$5 billion (S$6.7 billion) during the first 11 months of 2024.
About 60 per cent of retail executives surveyed expect to sell assets as they divest low-growth and non-core parts of their portfolios.
M&A activity rebounded in the financial services sector in 2024, driven by technology, regulation and changing customer demands.
Further consolidation was seen in the media and entertainment space in 2024, and this is expected to continue as traditional companies compete with Big Tech’s expansion into the sector, Bain said.
It expects no let-up in M&A deals in the retail sector in 2025.
Global M&A deal value hit US$3.6 trillion in 2024, up 13 per cent from 2023, Bain said.
In South-east Asia, the M&A deal value was US$70 billion in 2024, up 70 per cent from 2023, it added.
