Strategic M&A deals in Apac fall 19% to US$584 billion as global deals hit decade-low: Bain

THE deal value of strategic mergers and acquisitions (M&A) in Asia-Pacific fell 19 per cent to US$584 billion in 2023, Bain & Company has found.

Deal volumes, meanwhile, were down 8 per cent, the consultancy said in its sixth annual M&A report.

The region’s “significant” decline in deal value came as global M&A deal values fell for the second straight year, hitting a decade-low of US$3.2 trillion. This was 15 per cent lower than the US$3.7 trillion recorded in 2022.

The valuation gap between what buyers were willing to pay and what sellers wanted to charge for their companies was the biggest obstacle to dealmaking, M&A practitioners surveyed by Bain said.

Potential sellers, meanwhile, cited more favourable deal valuations as a top factor in deciding when to bring their assets to market.

Other factors which hindered M&A deals included high interest rates, macroeconomic uncertainty, rising regulatory scrutiny, and new political pressures. High interest rates, in particular, resulted in more selective dealmaking, according to two-thirds of the 50 executives interviewed by Bain.

Notably, strategic deal multiple tumbled to their lowest level in 15 years at 10.1 times. In contrast, public market valuations finished 2023 at an all-time high.

“The drop in deal multiples led to a wait-and-see atmosphere in 2023, with many sellers hesitant to come to the table at a market bottom,” said Les Baird, partner and head of Bain’s global M&A and divestitures practice.

Bain’s study also found frequent acquirers continuing to outperform their inactive peers in total shareholder return, widening the performance gap between the two.

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Looking ahead, the consultancy believes that assets that did not come to market in 2023 will fuel active dealmaking in 2024. Corporates will offload assets that do not fit with their strategy, and private equity will sell ageing portfolio companies.

“This year, buyers have their eyes on a growing backlog of deals. A need for liquidity will motivate some sellers, while others will divest assets while reshaping their portfolios,” Baird said.

He believes the logjam in M&A markets will break as interest rates stabilise, leading to intense competition for assets.

The report, which concentrates on strategic M&A, covers deals by corporate buyers, including sponsor exits, and private equity add-on acquisitions.