APAC tops global M&A activity in Q3 as PEs lap up assets at lower valuations

A graphic of a globe facing the southern hemisphere. Photo: Getty Images via DealStreetAsia

Private equity firms, corporates, and other buyers in the Asia Pacific lapped up assets for a discount in the third quarter of 2020, making the most of the low valuations in the pandemic-hit year.

The APAC region saw the highest mergers & acquisitions (M&A) activity globally in July-September, according to a recent report by consultancy EY.

“On average, valuations have declined at least 20 per cent compared to the pre-COVID period,” Yew-Poh Mak, EY APAC Strategy and Transactions Leader told DealStreetAsia.

PE investments in APAC had slowed down significantly when the pandemic hit early this year, however, it started to pick up pace in the third quarter. “We’re seeing PEs bid actively — both Asia-based funds and also global funds,” added Gary A Nicholson, EY Asia-Pacific Transactions and Corporate Finance Leader.

In Q3, M&As in APAC were driven by domestic mergers and technology deals. Overall, APAC M&A deal value reached $392 billion in July-September. There were at least eight major PE deals in APAC in the three months — five acquisitions and three exits, showed EY data.

Some of the significant PE acquisitions include the 28.06 per cent stake acquisition of Mangrove 3 Ltd, the property management unit of China Evergrande Group by CITIC Capital Holdings and other investors for a valuation of $3 billion in August. In the same month, there was also the 100 per cent acquisition of Japan’s Takeda Consumer Healthcare by the global investment firm Blackstone Group for a $2.3 billion valuation.

Expand Table

PE acquisitions in APAC (Jan-Sept 2020)

CompanyHeadquartersSectorValue (US$b)Acquirer
AirTrunk Operating Pty Ltd (88%)AustraliaTechnology1.8Macquarie Infrastructure & Real Assets Pty Ltd
Property Portfolio (LG Twin Towers in Beijing, 100%)ChinaRHC1.1GIC Pte Ltd.
Nichii Gakkan Co Ltd (100%)JapanHealthcare1.5Bain Capital
Jio Platforms Ltd (2.32%)IndiaTelecom1.5KKR
Jio Platforms Ltd (2.32%)IndiaTelecom1.5Vista Equity Partners LLC
Mangrove 3 Ltd (28.06%)ChinaRHC 3CITIC Capital Holdings Ltd along with other investors
Takeda Consumer Healthcare Co Ltd (100%)JapanHealthcare & Life Sciences 2.3Blackstone Group
Property Portfolio (15 million sq ft property portfolio, 100%)
CoWrks India Pvt Ltd
IndiaRHC1.8Brookfield Asset Management Inc
Reliance Retail Ventures Ltd (2.13%)IndiaConsumer1.3Silver Lake Group LLC
Shinhan Financial Group Co Ltd (7.58%)South KoreaFinancial Services1Affinity Equity Partners (HK) Ltd, Baring Private Equity Asia

The big PE exits included the 100 per cent divestment of PT Softex Indonesia by CVC Capital Partners at a valuation of $1.2 billion, and the 100 per cent sale of BJ14, a data centre in the Shunyi District of Beijing, China by CITIC Private Equity Fund Management for $600 million.

Expand Table

PE exits in APAC (Jan-Sept 2020)

Announcement dateCompanyHeadquartersSectorValue ($billion)Divestor
January 2020AirTrunk Operating Pty Ltd.Sydney, AustraliaTechnology1.8Goldman Sachs, TPG Capital
April 202058.com Inc (90.08%)ChinaTechnology7.8Access Technology Ventures, Genesis Investment Management, Tencent Holdings, T. Rowe Price
May 2020China Everbright Bank Co Ltd (8.66%)ChinaFinancial Services2.4China Huijin Investment Limited
May 2020H-Line Shipping Co Ltd (58.06%)South KoreaMobility 1.4AlpInvest Partners
May 2020ESG Co Ltd (100%)
ESG Cheongwon Co Ltd
South KoreaPower & Utilities0.7Anchor Equity Partners
June 2020Guangzhou Friendship Group Co Ltd (100%)ChinaConsumer0.6Bank of China Ltd
China Investment Corp
Guangzhou Commerce Investment Holding Group Co Ltd
June 2020Canadian International School Pte Ltd (100%)SingaporeOther sectors0.5HPEF Capital Partners Ltd
Southern Capital Group Pte Ltd
September 2020PT Softex Indonesia (100%)IndonesiaConsumer1.2CVC Capital Partners
September 2020Property Portfolio (BJ14, a data center in the Shunyi District of Beijing, 100%)ChinaRHC0.6CITIC Private Equity Funds Management Co Ltd
September 2020Modern Star Pty Ltd (Australian and New Zealand business , 100%)AustraliaProfessional Services0.4Navis Capital Partners Limited
Source: EY

EY noted 154 PE acquisitions in the first nine-months of 2020 and 56 PE exits in APAC. The total M&A value, including PE deals, in the first nine-months of 2020 was $708 billion, compared with $665 billion in the year-ago period — an increase of 6.4 per cent.

The active PE deals trend is expected to continue, mainly in the acquisitions side as the players are said to have raised around $300 billion of dry powder to be deployed in APAC in the next three to four years, said Mak.

“The private equity capital that has been raised over the last several years needs to be deployed…it’s chasing a home,” he added. Aside from the significant amount of dry powder, some global PE players will look to deploy more capital to not lose out on opportunities.

APAC’s most active sectors in terms of M&A deals will be technology, advanced manufacturing, and consumer goods. The technology sector was one of the first sectors to rebound in APAC, with deal volume returning to 2019 levels, and it continues to drive M&As as part of the transformation agenda across industries.

Throughout the first nine-months of 2020, the telecommunication or tech sector noted the main growth in deal activity with 19 per cent growth year-on-year, followed by life sciences or healthcare (9 per cent) as well as power and utilities (9 per cent).

Despite the decline due to COVID-19, M&A activity across APAC has been resilient throughout 2020 driven by industry and corporate reorganisation.

APAC’s M&A deals volume noted only 8 per cent decline in the first nine months of 2020 compared to 2019, while M&As in the US dropped 20 per cent and the European market was 15 per cent lower.

Overall, China’s deal volume rose to the 2019 monthly average level in March and April 2020 and has remained relatively steady for the second half of 2020. While mega domestic deals have driven Japan’s domestic M&A value to a 15-year high in Q3 2020, EY said.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.