West-to-East value shift: APAC-Japan beats other regions in tech M&A in 2016

Photo from Flickr, Flazingo Photos

Buoyed by the strong performance in China and Japan, the Asia Pacific Region along with Japan (APJ), beat other regions M&A trends in the tech space.

According to  Global technology M&A report,  APJ was the only region whose aggregate value rose for the year,  a 174 per cent increase to $141.4 billion.  This record high also helped to increase APJ’s share of global technology M&A value to nearly tripled to 30 per cent in 2016 as compared to only 11 per cent a year ago.

Globally, the aggregate value of M&A deals in 2016 was $466.6 billion- the highest ever, 2 per cent over 2015 prior record. The full-year volume of 3,796 deals slumped 5 per cent.

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“The region’s rise, coupled with a 23% fall in US buyer value, caused a notable West-to-East value shift,” said EY in its report.

Full-year deal value in the Americas was $267.6 billion, 20 per cent lower than in 2015. That decline and rising APJ value during 2016 shrunk Americas’ share of global value to 57 per cent from 73 per cent in 2015. Volume fell 6 per cent to 2,399 deals, which accounted for 63 per cent of global volume, compared with 64 per cent in 2015.

In the Europe, Middle East and Africa region full-year volume declined 4 per cent to 873 deals. Full-year value of $57.6 billion was 19 per cent lower than in 2015, which included two megadeals above $10 billion. EMEA had only 15 of 2016’s record 92 global deals of $1 billion or more.

Accounting for 76 per cent of the increase China and Japan were the driving force in the region. Also, 24 big-ticket deals amounting to a total $108.9 billion in 2016 across APJ dominated the increase. Of the 24 deals,  17 we  made by China (mainland) buyers, followed by three from Japan and two each from South Korea and Taiwan. In comparison, in 2015 there were 10 big-ticket APJ deals of total value of $29.7 billion.

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EY Report

 

During 2016, APJ volume fell marginally by 1 per cent to 524 from 529 deals a year ago, this was however, less than the global average decline of 5 per cent. The region had 14 per cent of global volume, up from 13 per cent in 2015.

In terms of numbers, India came in second in APJ with 132 deals, accounting for 25 per cent of APJ volume. However, the total value of the deals that were  disclosed was only $1.9 billion. In India cloud/SaaS deals by software development and outsourcing companies. Many of India’s other deals targeted online businesses and mobile apps.

“The west-to-east value shift in 2016 was due to a combination of a few big-ticket deals in APJ while the US market experienced a slow year for deals, which is likely to continue in 2017. We may see an even bigger hike in APJ deal activity for 2017 since Asia’s old tech industries such as telecom and media strongly require further consolidation,” said Joongshik Wang, EY Asean Transactions Leader for Technology, Media and Telecommunications.

“Activity will also be driven by continued interest from APJ investors in new tech companies in areas such as Fintech, e-commerce and IoT where there are proven business models in the US market. Another possible trend this year will be large institutions showing more interest in disruptive companies to aid them in their digital transformation,” added Wang.

The region also made a significant impact in cross-border deals in 2016. Owing to the 2016 increases in cross border value from China, Japan, South Korea and Taiwan, the APJ region  more than tripled its share of cross border value in 2016 to 45 per cent  from an average of 14 per cent for the past three years.

Among the acquirers, non-technology company buyers more than doubled their disclosed value of global tech M&A for the second consecutive year in 2016, showed the data. This increased activity by non-tech players helped to drive the year’s new all-time aggregate value record even as incumbent tech company buyers declined. PE buyers also contributed to the record, with rising value of their own.

“The changing composition of technology buyers re ects rapidly growing cross-industry blur between tech and other industries, as non-tech companies undergoing digital transformation acquire strategic technologies,” said EY.

Non-tech buyers accounted for 19 per cent of APJ volume and 39 per cent of value, including APJ’s largest deal: the $32.4 billion deal for ARM by Japanese multinational mobile telecommunications company SoftBank Group. ARM, is a UK-based  semiconductor design firm known for the microprocessors in most smartphones.

Even though the full year saw an increase in 2016, the fourth-quarter volume in the APJ region dropped 24 per cent year-on-year and 25 per cent sequentially to 110 deals, while value fell 26 per cent year-on-year  and 61 per cent sequentially to $20.5 billion.

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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.