Mergers and acquisitions to pick up in Asia: J.P. Morgan
Mergers and acquisitions to pick up in Asia: J.P. Morgan
SINGAPORE (Dow Jones): The pace of mergers and acquisitions is likely to pick up in Asia as sharply depreciated asset values begin to stabilize, according to a key executive at J.P. Morgan Securities Asia Pte Ltd.
Hurt by the crisis, Asian companies are now viewing tie-ups or takeovers as a way of improving their financial position, said the company's Singapore-based Managing Director Cezar Consing.
Foreign companies, meanwhile, are taking advantage of expanding within the region at a much lower cost compared with pre-crisis values, he added.
"In terms of M&A (merger and acquisition) transactions, things are looking up for Asia," Consing said in an interview with Dow Jones Newswires. "When things stabilize, deals will get cut."
J.P. Morgan Securities Asia is a unit of U.S. investment bank J.P. Morgan & Co. The group is involved in such areas as advising on mergers and acquisitions, asset management, managing investment portfolios and raising equity and debt capital.
The outlook for the region hasn't yet turned rosy for the region, Consing said. But, he said the increase in the number of mergers and acquisitions is a sign that the region is on the mend.
The talk of mergers and acquisitions have so far exceeded the actual level of activity, Consing said. He estimated that only some 30 merger-and-acquisition transactions valued at above US$100 million have taken place this year.
For the rest of the year, the region could see about twenty more mergers, with each transaction valued at a minimum of US$100 million, Consing predicts.
Consing, who's also co-head of the company's emerging Asia investment banking division, said he and his colleagues were involved in structuring the recent 45 percent stake sale of Nestle Philippines by San Miguel Corp to Nestle SA that was announced Friday.
The Nestle Philippines transaction, valued at about 30 billion pesos (US$694 million), ranks as the largest single foreign investment in the Philippines this year, he said, adding it's a significant development in a region where liquidity is tight.
The group was also recently involved in two mega transactions - the merger of British Telecommunications Plc and AT&T Corp and that of British Petroleum Co and Amoco Corp.
In Singapore, the group assisted in the merger between Singapore's Neptune Orient Lines and American President Lines of the U.S. last year.
J.P. Morgan Securities is currently involved in several other merger and acquisition deals, none of which has reached completion, Consing said. He declined to provide details except to say the merger candidates are "all over the region" and not restricted to any one industry.
With the difficulties caused by the regional financial crisis in raising cash from capital markets given widening interest rate spreads, more and more Asian companies are likely to consider mergers and acquisitions as a "way of cashing out and spreading growth," he said.
It was less than two years ago, Consing pointed out, that Asian companies were reluctant to sell, given the region's tremendous growth potential.
He said companies should increasingly realize that at a time when markets are performing poorly and economies are weak, the value of a company is of greater importance than control.
"I think there'll be more of these transactions, where you'll have non-Asian MNCs (multinational corporations) buying into Asian companies," Consing said. "That's because there's not enough capital in Asia right now."
In Asia's emerging markets, Consing said mergers and acquisitions are "all a part of the restructuring and healing process," adding they will mean more efficient companies and a more competitive operating environment.
As a practitioner, Consing said he hopes the recovery of Asian markets doesn't retard the pace of mergers and acquisitions in the region.
"Hopefully, people realize that a good partnership and good M&A transaction can do so much for a business," he said.
In the months ahead, Consing said he expects to see more deals done, but adds it's likely the total value of these deals may not accurately reflect the number of transactions because of the deflated asset values.
For the year to-date, in Asia excluding Japan, about 414 such transaction have been completed totaling about US$17 billion in value, according to J.P. Morgan data.