Daily Management Review

M&A Fees A In Asia Touches 11-Year Low Because Of Time Consuming Deals


M&A Fees A In Asia Touches 11-Year Low Because Of Time Consuming Deals
In the first half of 2024, financial advising fees from mergers and acquisitions in Asia fell to their lowest levels in 11 years, with falls in both announced and completed transactions showing no indication of a rapid recovery.
According to LSEG statistics, M&A fees in Asia were $1.5 billion in the first half of the year, the lowest amount since 2013. Forty percent of that came from Japan alone.
The reduction in fees may put more strain on investment banks, which have already laid off hundreds of workers in Asia over the last two years due to sluggish capital markets and declining profits.
The statistics revealed that the overall value of announced transactions in Asia fell by 25% year over year to $317.5 billion, which is also an 11-year low, suggesting that transaction revenue may stay tight.
With $253 billion in completed acquisitions, it was the fewest since 2009, when the market was badly impacted by the deep wounds of the global financial crisis.
According to Tom Barsha, head of Bank of America's Asia Pacific M&A, "investors are prioritising mid-sized opportunities over large transformative M&A, which is driving much of the decrease in M&A deal volume year to date."
After a six-week pursuit, Australian miner BHP Group abandoned its $49 billion proposal to acquire competitor Anglo American last month, putting an end to what may have been one of the largest payouts to bankers worldwide this year.
The only Asian market to see increase in M&A in 2023 was Japan, where announced transactions fell 23% to $61 billion in the first half of the year as the yean weakened. .
China's enthusiasm for foreign investment was tempered by a slowing economy and escalating geopolitical concerns; agreements totaled $108 billion in the first half, a 25% decrease from the same time in 2012.
The downturn in Asia contrasts with a 16% increase in M&A activity worldwide, with $1.5 trillion in agreements.
A few Asian bankers anticipate that deals would be driven by investments in digital infrastructure, take-privates, and private equity. They also mentioned that more sales procedures may be introduced before the end of the year.
Sponsors are reintroducing firms to the market, says Rohit Satsangi, co-head of M&A for Asia Pacific at Deutsche Bank.
"We are seeing more reasonable valuations supported by better financial markets and a wider group of buyers," he stated.
According to him, China's outbound operations have also resumed, with state-owned and private enterprises searching for assets, particularly in Europe.
"A critical element of dealmaking which remains subdued is investor confidence, and it is intrinsically linked to capital markets activity and valuations," Barsha of Bank of America stated.
Increasing early stage M&A talks are a result of higher capital markets activity in the second quarter, he added, and this suggests a better prognosis for transactions.