Merger and acquisition (M&A) activity in the Asia-Pacific region, excluding Japan, has recorded a 2.5 per cent decline in the first quarter of 2020 to $189.6 billion, the lowest Q1 deal value since 2014, according to a data by Refinitiv.
The number of announced deals also fell 17.6% from Q1 of 2019 due to the challenging deal environment across the region, especially China.
“China has been one of the very active markets when it comes to deal-making for the previous years, but in the past few years, we’ve seen a decline in China,” said Elaine Tan, Refinitiv’s Senior Analyst, Deals Intelligence.
The factors that have contributed to slower deal-making in China include regulatory hurdles, uncertainty over the US-China trade spat as well as the recent COVID-19 pandemic outbreak. Also, the APAC region is witnessing deal activity slowing down in the first quarter on account of the Chinese New Year holidays.
Refinitiv also noted the M&A activities involving China has declined 11.5 per cent from Q1-2019, with total valuation at $87.4 billion. This also shows the slowest M&A activity since 2014, Tan said. Meanwhile, China’s outbound acquisition stood at around $2.2 billion, 81 per cent lower than a year ago, marking the lowest Q1 record since 2005.
“China, a big player in outbound cross border M&A, fell further down the rankings to around 17th as the most active nation for global cross-border activity this year, after being one of the largest suppliers of overseas assets during its peak in 2016,” Tan said.
The data also shows that there were no announced deals with more than $500 million value in Q1-2020 while there were around three deals with a valuation of $1 billion last year.
The uncertainty with the onset of the global coronavirus pandemic has weighed down on corporate deal-making activity, she added.
According to Refinitiv’s end-2019 survey, dealmakers expressed optimism about M&A activity in 2020. However, the unforeseen economic events triggered by the pandemic have brought uncertainty to the deal-making environment.
Nevertheless, the healthcare sector is seen to record increased activity in the current situation. “Maybe not as big as the other sectors, but when we were looking at some of the industry trends for Q1, it will (also) depend on each sub-region in Asia,” Tan said.