Asia shows resilience with robust M&A

Half of Chinese financial services companies expect to take part in mergers and acquisitions in 2008, according to a survey published on Tuesday by PwC, which expects China to remain the most active M&A market in Asia.

Indian financial firms are also optimistic, with 34 per cent expecting to do deals this year. On average, 40 per cent of financial services companies in Asia expect to undertake M&A transactions in 2007 and 70 per cent expect to do so within five years.

The results underline the robustness of the M&A market in the financial services industry in Asia, which has remained relatively unscathed by the credit crunch and the slowdown in the US and Europe.

Asian countries are also seeing healthy economic growth, with financial services companies benefiting from robust stock market turnover, increasing insurance premiums and strong loan growth. According to Thomson Reuters, M&A volume in Asia has decreased only 1.9 per cent so far this year to $252.3bn from the same period last year, compared with a 36.9 per cent drop globally.

About 44 per cent of the 281 Asia-based financial services senior executives surveyed by PwC expect M&A deal volumes to rise this year in spite of the credit crunch, as they expect potential sellers to consider deals that may not have been attractive previously.

While M&A activities in financial services jumped by more than half in China last year, the total value of transactions dropped in the first quarter due to a deferral of large deals and a slowdown of transactions because of the credit crisis.

But Matthew Philips, head of PwC’s financial services M&A practice in China, said a pick-up in activity was well under way. “Our pipeline is greater than it was last year,” he said.

In China, eight of the top 10 financial services transactions last year were done by domestic players, up from 60 per cent in 2006, as Chinese firms, often armed with hefty capital from stock offerings, became more acquisitive.

As the Asian M&A market remained strong, PwC said regional companies would also take bigger roles in future deals as their western counterparts tightened belts.

Last month, Malayan Banking , Malaysia’s largest financial services company, beat Bank of China, HSBC and Kookmin Bank of South Korea to buy a majority stake in Bank Internasional Indonesia. Mr Philips said a western firm could have won the auction had it not been for the credit crisis.

In another trend, more than 80 per cent of respondents expect sovereign wealth funds to invest more in the financial services industry in Asia.

(FT)