M&A to pick up pace in 2017

Singapore Business Review - - FINANCIAL INSIGHT: MERGERS & ACQUISITIONS -

Hong Kong’s cen­tral­ity and po­si­tion as a fi­nan­cial and cor­po­rate hub for Asia and the Pa­cific played a huge role in the con­sis­tent sus­tain­able show­ing of the ter­ri­tory’s M&A ac­tiv­i­ties in 2016. Pri­mary rea­son for this re­mains the ris­ing trans­ac­tions of main­land Chi­nese com­pa­nies in­creas­ing their stakes and deals in putting their in­ter­est in the Spe­cial Ad­min­is­tra­tive Re­gion.

With the rest of the re­gion main­tain­ing a cau­tiously pos­i­tive out­look to­wards growth in deals, Hong Kong is ex­pected to re­main as one of APAC’S bas­tion for trans­ac­tions. This is de­spite sev­eral fac­tors in­clud­ing the loom­ing in­creases in pol­icy rates in­ter­na­tion­ally, pol­icy re­forms in ma­jor mar­kets like main­land China, and the rise in pro­tec­tion­ism that’s cur­rently creep­ing in in­ter­na­tional fi­nan­cial and trade mar­kets. 2016 was good for Hong Kong’s M&A, but ex­perts are say­ing 2017 may well be bet­ter if the right pre­cau­tions are taken as var­i­ous un­cer­tain­ties abound.

Pos­i­tive mo­men­tum

The last twelve months was a rel­a­tively pos­i­tive year for M&A ac­tiv­i­ties in Hong Kong de­spite a de­cline in ac­tual growth rate com­pared to fig­ures in 2015. Ac­cord­ing to Elaine Tan, se­nior an­a­lyst, deals in­tel­li­gence. Asia-pa­cific, Thom­son Reuters, over­all an­nounced M&A ac­tiv­ity in­volv­ing Hong Kong-based com­pa­nies to­talled US$152.4B in 2016, down

44.2% af­ter com­ing from a record high in 2015 at US$272.9B. But the 2016 fig­ures, ac­cord­ing to Tan, re­mains a pos­i­tive and el­e­vated one when com­pared to his­tor­i­cal M&A ac­tiv­ity in Hong Kong.

In terms of av­er­age M&A deal size for dis­closed deals, Tan shares that num­bers also de­clined yearon-year to US$99.7M com­pared to the US$218.8M recorded in 2015 as less trans­ac­tions above

US$1B were wit­nessed in­volv­ing Hong Kong-listed com­pa­nies over the last 12 months. In ab­so­lute terms, the Spe­cial Ad­min­is­tra­tive Re­gion only saw 24 deals above the bil­lion-dol­lar mark with only two breach­ing up­wards the US$5B thresh­old com­pared to 2015’s stel­lar fig­ures with 33 deals an­nounced above the bil­lion-dol­lar mark, three of which were “jumbo deals” above US$10B, ac­cord­ing to Tan. She adds that the M&A deal flurry in 2015 con­tin­ued its pos­i­tive mo­men­tum last year.

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