Asia-Pac M&As hit all-time high in H1 2021 fuelled by tech sector

MERGERS and acquisition (M&A) activities in the Asia-Pacific region hit an all-time high in the first half of 2021 amid market recovery from the Covid-19 pandemic, said Ernst & Young Solutions (EY).

M&A values targeting the region rose to US$535 billion, compared with US$284 billion from the same period a year earlier, while cross-border transactions have also increased by almost three times year on year to US$159 billion, EY said in a statement on Wednesday.

Inbound value in the region reached a historical high of US$74 billion, a 170 per cent increase compared to the pre-Covid-19 average, while outbound value rebounded to pre-pandemic levels of US$85 billion, it said.

The technology sector led deal activities in the region, accounting for 28 per cent of the cumulative deal value in the half-year period. M&As targeting technology companies also hit a record high with deal values increasing by 88 per cent year on year. The advanced manufacturing and mobility sectors were the subsequent most active in terms of deal activity in the region.

So far, Asia-Pacific saw more than 50 deals over US$1 billion targeting the region, an increase of almost five times year on year.

Furthermore, the appetite for deals in Asia-Pacific is at its highest level since 2010, with almost 90 per cent of companies in the region indicating that they are on the lookout for cross-border acquisitions in the next 12 months, compared with 65 per cent of companies globally, according to the EY Capital Confidence Barometer.

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Mak Yew-Poh, EY Asia-Pacific strategy and transactions leader, said M&A activity in the region was fuelled by the emergence of next-generation technological applications, including industrial Internet of Things, artificial intelligence, electric vehicles and sustainable, fuel-efficient technologies.

"Identifying potential areas of growth to make acquisitions and making the difficult decision to divest underperforming assets are both firmly on the corporate agenda in the Asia-Pacific and worldwide," Mr Mak said. He noted that businesses consolidate to complement strength and differentiate themselves, and in the technology sector, to focus on business resilience, digital technology alignment, and to gain market share.

He added that the acquisition of emerging technologies and innovative solutions can help companies scale up their existing technological capabilities and spur digitalisation amid disruptions during the Covid-19 pandemic.

EY noted that the Americas and Europe have also witnessed record growth, with transaction values totalling US$1.6 trillion and US$653 billion, respectively.

Additionally, environmental, social and governance (ESG)-related deals have also jumped to US$96.5 billion in H1 2021 from US$35.7 billion in H1 2020, while M&A activity in the renewable energy sector almost tripled globally year on year in the first half of 2021.

EY global vice chair of strategy and transactions Andrea Guerzoni said ESG is "increasingly becoming an integral part of investment decisions", as chief executives look to meet ambitious environmental targets through transactions.