Mergers and acquisitions in Asia-Pacific subdued, India an exception: S&P Global Market Intelligence

Mergers and acquisitions in Asia-Pacific subdued, India an exception: S&P Global Market Intelligence
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New Delhi, India: Mergers and acquisitions in Asia-Pacific's finance sector are unlikely to pick up soon as economic uncertainties, higher funding costs and geopolitical risks dent dealmakers' confidence, according to an analysis by S&P Global Market Intelligence.

Deal volume in the finance sector dropped almost 14 per cent year-on-year during the quarter ended March 31, dragged by a decline in mainland China and Australia, according to the financial information and analytics firm.

Deal activity in the Asia-Pacific region broadly mirrored global trends. Global merger and acquisition announcements in the quarter fell to 9,022, the lowest total since the onset of the Covid-19 pandemic, which disrupted markets in the second quarter of 2020.

Just nine finance sector deals were announced in mainland China in the first quarter, compared with 24 the year before, S&P Global Market Intelligence data showed. In Australia, investors struck 12 deals in the sector, down from 26 a year earlier.

India, the fastest-growing large economy in the world, could buck the trend, it said, quoting analysts. India reported a one-deal increase in volume year-on-year in the first quarter.

Given India's strong growth forecasts and resilience to global shocks, Asialink Business CEO Leigh Howard said there's a reasonable expectation for robust dealmaking. Howard also cited India's favorable demographics, ongoing reforms and growth opportunities.

Economic uncertainties, higher funding costs and increased volatility due to geopolitical risks are among the factors deterring M&A activity in the region, said Raghu Narain, managing director and head of investment banking for Asia-Pacific at Natixis CIB.

"These conditions are detrimental to M&A activity because they put a dent in confidence, and therefore the gap between buyers and sellers, valuations, and agreement of deals, persists -- and that's what we've been seeing in Asia-Pacific," Narain said.

The finance sector includes banks, nonbanking financial institutions, and companies classified under the insurance, financial technology, payments and specialty finance sectors.

Improvement in sentiment is needed for an across-the-board turnaround in finance M&A, according to Asialink Business CEO Leigh Howard.

Investor confidence and sentiment are crucial drivers of M&A activity, Howard said, adding, an upswing in market sentiment is needed for significant dealmaking to return.