Cross-border M&A recovers in Asia as dealmakers look abroad for growth

Cross-border mergers and acquisitions involving companies in the Asia-Pacific region have recovered this year and are booming in Japan as businesses seek new growth after adjusting to cope with higher interest rates.

The total announced value of such deals rose 25 per cent year-on-year to $286 billion as of Sept. 30, LSEG data showed, with around 80 per cent of them transacted with an entity outside the region.

"There has been a notable pick-up in cross-border transactions as political stability returned to some markets just as pent up demand for investments and dealmaking and adjustments to higher interest rates began to drive M&A activity again," said Andre Gan, a M&A partner at Wong & Partners, a member law firm of Baker McKenzie in Kuala Lumpur.

Overall, Asia M&A totalled $622 billion in the first nine months of the year, down 0.2 per cent from the same period in 2023, LSEG data showed.

The cross-border recovery was partly boosted by a number of mega-deals, including Canadian firm Alimentation Couche-Tard $38.5 billion all-cash takeover bid for Japanese convenience store owner Seven & i Holdings, the largest announced M&A deal globally this year.

Rupert Murdoch-controlled Australian firm REA Group has also been bidding aggressively for British real estate portal Rightmove RMV.I, having sweetened its offer to $8.3 billion after three previous proposals were rejected.

Japan is going to drive the region's multibillion-dollar deals, bankers said, as relaxed corporate governance rules have made its public companies more open to takeovers, while some of the local champions are seeking to expand overseas.

Japan inbound M&A surged more than 16-fold so far this year to a record $74 billion, while outbound deals were up 49 per cent to $50 billion, LSEG data showed.

Texas-headquartered real estate investor Hines, which owned and operated $93 billion worth of assets as of June 30, is actively looking for opportunities globally including Asia, its Asia chief investment officer Ng Chiang Ling told Reuters this month.

Having acquired some assets in Japan and Singapore this year, Hines also sees opportunities in Australia, Ng said.

In Southeast Asia, cross-border transactions are picking up. German insurer Allianz announced in July that it was planning to buy a majority stake in Singapore's Income Insurance for about $1.6 billion to strengthen its foothold in Asia.

"Looking forward, 50 per cent of the APAC pipeline is made up of global cross-border transactions," said Rohit Satsangi, Deutsche Bank's co-head of M&A, Asia Pacific.

Satsangi said he expected a resurgence of outbound activity by state-owned companies in China that are searching for renewable and natural resources assets globally.

A bounce in China would be welcomed by dealmakers. China outbound deals totalled $14 billion so far this year, down 8 per cent year-on-year and were at the second-lowest level in the last decade, LSEG data showed.

Wong & Partners' Gan said the overall outlook for M&A in the region was expected to improve, including for deals that did not cross borders.

"Heading into 2025 and 2026, considering the recent easing of interest rates by the US Fed and conclusion of the US elections in late 2024, we expect continuing stability to lead to a resurgence of M&A activity," he said.