Despite slowdown in global M&A activity, Asia Pacific investors continue to seek high-growth assets across the continent
High inflation, geopolitical uncertainty, and an uncertain macroeconomic outlook slowed M&A activity around the world in 2023 as investors adapted to the “new normal.” Asia-Pacific trade targeting Europe also followed this downward trend.
In 2023, there were a total of 414 inbound transactions between APAC and Europe worth USD 36.1 billion. This was a 10.8% decrease in volume and a 25.8% decrease in total value compared to the previous year. The latter decline was due to a decline in transactions targeting Western European assets, which amounted to USD 33.5 billion last year, compared to USD 47.7 billion in 2022.
However, over the same period, total APAC-led deals targeting assets in Central and Eastern Europe rose to a still modest US$2.64 billion last year, although less than US$1 billion in 2022.
M&A activity by amount 2020 – 2023
Target region: Central and Eastern Europe, Western Europe Bidding region: Asia Sector: All sectors
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Despite the decline in total value, APAC buyers continue to seek out assets within the continent to gain technology expertise and expand into new markets. The second quarter of 2023 was a particularly dynamic period, with 127 deals announced featuring his APAC bidders targeting European assets. This was the highest volume for a single quarter since his fourth quarter of 2020, when 136 deals were announced.
The biggest deal this year was in Germany’s popular industrial sector, with Singaporean sovereign wealth fund GIC buying a minority stake in gas specialist Messer. Through the transaction, which has a total value of €2 billion and values the company at more than €12 billion, Messer CEO Bernd Jüritz said the company would be the company’s “number one player in the global industrial gas sector.” He said he hopes to become a challenger.
Last year, GIC was involved in top 10 transactions in APAC and Europe, particularly in the tourism sector in Southern Europe. Announced at the end of October, the sovereign wealth fund will buy Blackstone a 35% stake in Barcelona-based Hotel Investment Partners (HIP), which operates resort hotels in Spain, Portugal, Italy and Greece, for an estimated €1.4 billion. It was reported that it was obtained from. Merger Market. Despite rising borrowing costs due to rising interest rates, HIP was able to focus on business expansion by raising equity.
Japanese dealmakers lead the pack
M&A remains an important tool for Japanese companies aiming to expand their global presence. Faced with the challenges of a shrinking domestic market and an aging population, domestic companies are being forced to diversify overseas. Japanese dealmakers are also in the fortunate position of having less competition from Chinese buyers. Evolving protectionist policies are currently reducing the influence of the latter in Western M&A markets.
As a result, Japanese dealmakers were the most active Asia-Pacific bidders in Europe in 2023, with a total of 135 announced deals worth US$10.8 billion and 66 deals worth US$6.5 billion. Australia was in second place. Excluding intra-regional transactions, Japanese bidders were only defeated by US buyers in intra-European M&A.
Japan’s biggest deal in Europe in 2023 was the €1.55 billion acquisition of Belgian offshore wind farm Parkwind by JERA, the country’s largest power company. Parkwind has interests in four wind farms off the coast of Belgium and other projects in Germany and Ireland. The partnership builds on JERA’s ambitions to globally expand its offshore wind power business, which currently accounts for a third of Japan’s electricity generation and about a tenth of its carbon emissions, and offset its carbon emissions. It emphasizes.
Europe’s rapidly growing gaming sector is also an area of particular interest. In April 2023, Japanese gaming conglomerate Sega Sammy made a US$776 million acquisition offer for Rovio, the Finnish game developer that created the most famous Angry Birds series. The deal reflects Sega Sammy’s desire to expand its influence in the mobile gaming sector, which it predicts will account for more than half of the total gaming market by 2026.
China is behind
Three months later, Tencent, China’s most valuable company by market capitalization, made a bid for another valuable European gaming asset. In July, the company moved to acquire Polish game developer Techland for an estimated 1.3 billion euros, with sales under pressure due to weak domestic gaming revenues.
Otherwise, there were very few European deals led by Chinese bidders in 2023. Besides the Tencent-Techland deal, only one other top 10 Asia-Pacific and European deal involved a bidder from mainland China. British pharmaceutical giant GSK to develop anti-cancer drug. The deal is worth up to US$1.7 billion depending on milestones achieved.
Overall, Chinese bidders appear to be avoiding deals in sensitive sectors such as defense and semiconductors due to tighter EU regulations. As a result, Chinese bidders participated in just 56 deals worth US$3.7 billion targeting Western European companies in 2023, a 10-year low in both volume and value.
UK attracts the largest deal volume
The UK was the most targeted region by APAC dealmakers in 2023 in terms of both volume and value. Despite the global downturn in M&A, the 127 deals announced were in line with recent performance, but the total value of those deals decreased by 26.4% from USD 18.7 billion in 2022 to USD 13.8 billion in 2023. did.
Data center assets are tied to dealmakers in the Asia-Pacific region, as evidenced by Australian pension fund AustralianSuper’s minority stake in UK-based Vantage Data, one of Europe’s largest data center operators. It has become a popular product for.
The deal, worth €1.5 billion, highlights the growing value of European data center assets as the rise of artificial intelligence and cloud computing creates intense demand for supporting infrastructure. . According to Statista, Europe’s data center market revenue is expected to reach USD 85.2 billion in 2024, further increasing international interest in high-quality assets in the region.
Australian dealmakers have been consistently active in UK M&A over the past decade, committing just over US$3.5 billion across 32 deals in 2023, the most active in global finance. This is the highest level since the crisis.
Another significant deal involving Australian bidders was the US$800 million financing announced in December by British energy supplier Octopus Energy. Investors included Origin Energy, one of Australia’s leading energy companies. Octopus, currently the UK’s second largest home energy supplier, will use the funding to build out its green energy capabilities globally.
Outlook
Although the European market remains an enduring attraction for Asia-Pacific investors due to its relatively stable legal and regulatory framework, market headwinds remain a challenge.
Financing M&A remains expensive and cross-border deals continue to slow, while a difficult financing environment and ongoing geopolitical uncertainty also pose hurdles.
But for many investors, the international appeal of fast-growing European companies will overcome any doubts or barriers. These assets will continue to attract attention from bidders in the Asia-Pacific region who have the necessary capital on hand. Specific sectors to watch include renewable energy, data centres, AI and electric vehicles, which are expected to drive cross-border M&A activity into Europe throughout 2024.
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