Oct. 14 – The economies of China and India seem to be on the way back as firms attending the Asia M&A Atlas Awards Summit at the Taj Palace Hotel in Mumbai all reported an increase in second quarter deals for 2009.
Presentations by regional tax firms Grant Thornton and Dezan Shira & Associates, the ICICI Bank and HR specialist Hewitt referred to the prevailing theme that domestic money is funding mergers and acquisitions in Asia and such deals are increasing.
H. V. Harish, a partner at Grant Thornton says the landscape has changed. “We are unlikely to see billion dollar deals in the medium term. M&A in the region will be largely measured in acquisitions of US$10 to US$20 million.” Chris Devonshire-Ellis of Dezan Shira & Associates echoed those comments. “The days of the massive leveraged buyout are over, he said. “Investors are looking to assist with building growth and not fully acquiring businesses. Partial stock acquisition and in China, strategic investments in solid joint ventures will be the way forward.”
All firms had seen an increase in regional M&A of about 20 percent during the first quarter compared to the second quarter for the year, with the upward trend apparently set to continue. Hewitt commented on the rise of salaries across the region being indicative of a return to business confidence throughout Asia, while the ICICI Bank reported healthy demand for financing for smaller deals, and again commenting that smaller M&A would be the likely trend for the foreseeable future.
Hemant Vora, ICICI general manager said: “Liquidity may still be tight in the United States and Europe for some time, while elsewhere investors are still exercising some caution. However, it is also true that there are many good businesses out there with capital needs to fund expansion, and in Asia the market sentiment is rather more positive for growth. ”
“Investors are increasingly looking to Asia and initially will tread softly until their domestic markets recovery to some normality. India however should be more robust than most and we are seeing an upwards swing in India sourced financing.”
Chris Devonshire-Ellis, emphasized the differences between the Chinese and Indian markets saying that: “In China, you do a deal because of government involvement. In India, you do a deal because there is no government involvement. Most funds providing finance for China M&A are now local and provincial government-backed, whereas in India it is largely private equity that steps in.”
Dezan Shira & Associates provides due diligence services for M&A deals in China and India. For information email info@dezshira.com.
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