A buzzing financial services industry will lead M&A activity in Asia in the coming year, finds the Asian M&A Insight conducted for IntraLinks, provider of On-Demand Workspaces™, by mergermarket. The survey respondents were 60 Directors, Managing Directors and Partners from leading M&A-focused investment banks and law firms based across Asia.
The first IntraLinks Asian M&A Insight reveals great optimism among senior M&A professionals with 88% being bullish about deal activity in Asia for the next 12 months. Almost a quarter even expect the M&A market to increase by more than 20%. The majority of respondents predict China (60%) and India (37%) to see the greatest year-on-year growth, while Korea was picked by merely 3%.
Financial services is the sector expected to lead activity (50%), followed by IT services (45%) and industrials (38%). Nearly one third of respondents (31%) consider a consolidation in the pharmaceuticals & healthcare sector very likely, given the lower manufacturing and R&D cost bases in Asian countries.
As one of the most varied, populous and geographically disparate regions within which to conduct deals, Asia presents unique operational and logistical challenges to M&A practitioners. Transparency of information (72%) and access to information (53%) are considered the most significant challenges on the buy-side of transactions. Regulatory or legal barriers were mentioned by 44% of respondents.
On the sell-side, managing corporate expectations (57%) was identified as the greatest challenge. The M&A experts also pointed at geographical and logistical problems (35%) as well as the confidentiality of documentation (35%) as a potential issue when conducting auctions and sale mandates. As one survey respondent noted: “Tackling multiple bidders is a major challenge”.
All M&A practitioners rely on electronic information as part of their due diligence process. Most widespread is the use of email (87%), followed by the use of CD/DVD (63%) and extranets (57%). A further 40% employ Virtual Data Rooms (VDRs) to conclude their transactions. Respondents in particular appreciate the convenience, multiple usage and cost savings related to the use of electronic information: “Offering electronic information improves the transaction by providing the convenience to team members to work simultaneously in different geographies irrespective of time zones, it also reduces travel cost and logistical problems.” – Survey Respondent
Cost effectiveness and a faster timeframe are named as the main advantages of using VDRs on the sell-side of a transaction. Respondents mainly expect to save lawyer and accountant fees (54%). More than a third of M&A professionals (35%) with VDR experience believe that it compresses the timeframe of the due diligence process significantly. The majority of survey participants (79%) think that cross-border transactions benefit most from utilising VDRs, followed by large multi-advisor transactions (67%) and auctions (58%).
Some respondents also noted that VDRs had certain unexpected benefits, such as allowing better management and administration of the deal, which is illustrated by the following comment: “The unexpected benefits of using a VDR is that it improves the quality of due diligence in terms of letting a person work in his/her space and comfort zone, and also by allowing the seller to measure the seriousness of the bidder through activity levels in the VDR.”
Commenting on the survey results, Rob Fisher, Managing Director - Europe and Asia, IntraLinks said: “The M&A market in Asia is booming. While much of the activity has historically been focused on the larger markets of Australia and Japan, there are clear growth opportunities in China and India as well as other countries. Regionally, both Financial Services and IT Services look set to lead the sector activity. Asian companies are also playing an ever-growing role in the global M&A market. We have seen from the IntraLinks Monitor: Tracking the European M&A Market that Asian corporates are expected to be a bigger factor in European deals than US private equity houses. As Asian participants grow in maturity and depth, this trend can only continue.”
About IntraLinks
IntraLinks® On-Demand Workspaces™ connect business communities and accelerate the intelligent flow of information and documents among participants. Through IntraLinks' secure, neutral, online environments, companies are better able to compete globally by accelerating essential business processes, simplifying communication and fostering rapid workflow. IntraLinks is easily accessible anywhere, anytime using a web browser.
Since 1997, more than 600,000 participants representing over 50,000 organisations worldwide have used IntraLinks On-Demand Workspaces™ to communicate and collaborate on thousands of projects and transactions. IntraLinks has been adopted widely in the financial services and pharmaceutical industries, where its clients include AstraZeneca Pharmaceuticals LP, Bank of America, Bear Stearns, Deutsche Bank, Ernst & Young, FDIC, TD Securities, Thomas Weisel Partners and WestLB, among hundreds of others.
