Rich with investment opportunities and positive demographics -- a young and dynamic population with growing disposable income and upward mobility -- Asean continues to pull international parties seeking out mergers and acquisitions (M&As).
According to the report "Asean connections: Cross-border M&A", which tracks cross-border deal-flows of Asean's fast evolving investment landscape, the 10-member bloc recorded 118 deals worth US$14.7 billion (489 billion baht) in the first quarter. This was a year-on-year increase of 8% in value and 7% in volume.
The report was by produced by Kroll, a global leader in risk mitigation and response solutions, and Mergermarket, a leading independent M&A intelligence service provider.
In 2016, the region recorded 534 M&A transactions valued at $57.9 billion. For foreign inbound M&As, Asean saw 223 deals worth $23.7 billion in 2016, a 10% rise in volume but a 16% drop in value, from $28.1 billion (202 deals), in 2015.
In 2016, intraregional M&As saw a surge in value along with a recovery from 2015's dip in volume, as Asean corporations began expanding into neighbouring geographies in searched of new markets for growth.
Whether 2017 will put on a similar performance remains to be seen, with the year beginning on a slower note with 18 deals worth $1.5bn in the first quarter, amid macroeconomic and geopolitical uncertainty, said the report.
But the remainder of the year holds promise for a repeat of 2016's trend, as Asean governments strive to strengthen trade and diplomatic relations, and regional corporations take to cross-border M&As as an accelerated pathway to resilient, sustainable and innovative growth.
Last year closed with 89 intraregional deals worth $18.9 billion, registering a sizeable year-on-year increase of 368% in value and 19% in volume, as 2015 only saw 75 deals worth $4bn come to market.
M&As within Asean may become more pronounced as the Asean Economic Community (AEC), formalised in December 2015, begins to take off, ushering in a new era of tightened intraregional cooperation, trade and development. The pact could result in heightened collaborative competition as local enterprises begin to face off against neighbouring rivals.
The AEC represents the establishment of a unified market of $2.6 trillion with a combined population of more than 622 million, though its efficacy as an economic reality remains to be seen.
Thailand was the top target jurisdiction for intra-Asean M&As by value from 2014 to the first quarter of 2017, boasting 38 deals worth $10.3 billion. With the country in mourning the passing of King Bhumibol Adulyadej and the coronation of His Majesty King Maha Vajiralongkorn Bodindradebayavarangkun possibly months away, there is speculation over a dampening of investment interest in the interim amid fears of political uncertainty.
Intraregional dealmaking in the country, nonetheless, has yet to reflect such sentiments, with the first quarter of 2017 registering the same deal volume (five) as the first quarter of last year. Momentum could pick up after the coronation.
Thailand is also the top bidder for intraregional M&As by value, contributing to 46 deals worth $12.9 billion from 2014 to the first quarter of 2017. Activity in the first quarter was highlighted by the $440 million acquisition of Vietnam Construction Materials JSC by Thailand-based SCG Cement-Building Materials.
But Richard Dailly, managing director at Kroll, warned the hybrid figure of the "businessman politician" is a characteristic of the business environment in Asean, which inherently creates corruption and compliance risks for investment and M&A activity Businesspeople have few incentives, when they also have political interests, to improve the regulatory environments in their home countries, as these can create potential barriers to their own business activities.
