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M&A value expected to rise in 2019

Released at: 16:56, 20/12/2018

M&A value expected to rise in 2019

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Many deals struck this year to come to completion next year, according to Baker McKenzie report.

by Linh San

M&As in Vietnam are forecast to reach $4.1 billion in 2019 and domestic IPOs $4.5 billion, according to the recent Global Transactions Forecast Report from Baker McKenzie.

“Notwithstanding a solid domestic economy, Vietnam still sees some cooling in M&A deals during 2018, and we now expect completed M&A deals to come in at under $3 billion for the year,” the report noted. “But a number of deals announced in 2018 will be completed in the coming year, indicating that M&A deal numbers will rebound in 2019.” With reforms to further facilitate foreign investment now underway and with the ratification of the CPTPP, inbound investment in particular is expected to accelerate through 2019-2021. Meanwhile, the report added, the strength in IPOs seen through 2018 is set to continue, and more State divestments from major State-owned firms will be seen in the coming few years.

M&As in the Asia-Pacific have increased in value in 2018, in line with Baker McKenzie’s expectations. Chinese domestic M&As cooled, partly driven by tighter credit conditions, but inbound M&As have gathered pace as overseas firms’ move to protect access to the Chinese market in the event of future trade barriers. India has seen a particularly strong year, with total M&As of around $80 billion. Japan and Australia have both seen stronger inbound and domestic activity this year.

Moving into 2019, underlying conditions for M&As appear solid, with most emerging Asia-Pacific economies being better insulated against US Fed rate hikes than in the past, though they remain vulnerable to US protectionism. Japan is set for an economic rebound and Australia is expected to enjoy robust growth. M&As in Vietnam and India will benefit from important policy reforms, which should make inbound investment more attractive, according to the report. Meanwhile, in China, consolidation in heavy industry and upgrading manufacturing capabilities will be key structural drivers of M&As in 2019 and beyond. But with growth shifting towards a new normal of around 6 per cent and the government seeking to further reduce financial risk via slower credit growth, M&A value in China is forecast to remain noticeably lower than in 2015-2016.

The depreciation of several key currencies in the region (including China’s renminbi) against the dollar in the closing stages of this year will also undermine the dollar value of Asia-Pacific deals in 2019. “We forecast total M&As in the region to rise to $751 billion in 2019. But as in other parts of the world, growth is slowing, meaning equity markets and deals are likely to take a pause in 2020. A modest upturn in growth in 2021 and the stabilization of global liquidity conditions point to a cyclical deal upturn the following year.”

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