October 26, 2021 • 12 min read SHARE ON LinkedIn Twitter Facebook Email this page HOME NEWS, DEALS & INSIGHTS INSIGHTS Asia Access Quarterly: Q2 & Q3 2021 Round-Up & Outlook: Asian cross-border M&A activity RELATED SUBJECTS Asia Access Our Asia Access experts provide a summer 2021 round-up on investment activity, and an outlook for the year ahead. Explore the Summer 2021 M&A highlights and our outlook for: Japan China India South Korea Southeast Asia Japan Strong M&A rebound makes for another record year for Japan Japanese M&A has strongly rebounded post-Covid, resulting in a competitive growth environment for corporates. A total of 2,794 deals were made in the first eight months of the year - up 15.8% from the same period in 2020, and the most since 1985 when data started being compiled, according to Kyodo News[1] The most significant return related to overseas acquisitions - Q2 & Q3 2021 saw average monthly deal count increase by 85% compared to Q1[2], with much of this coming from the manufacturing / industrials industries, particularly in the areas of electronics, automation and other capital equipment. Tech & software also played a key role International deal-making returns Japanese M&A has been driven this period by the physical return to international deal-making, signalling a return of confidence not just for M&A, but business activity overall Geographically, the US and Europe were the most prominent targets for Japanese outbound investments, with a 36% and 18% increase respectively[3] However, given some remaining Covid-19 restrictions following the 2021 Olympics, many companies are still conducting deal processes on overseas acquisitions from Japan, particularly with familiar targets Streamlining Japanese portfolios The pandemic played a significant role in encouraging efficiencies, driving Japanese corporates to streamline their portfolios Non-performing businesses lacking in critical mass, growth prospects or profitability, have been stripped to make way for profitable acquisitions, whereas previously there was a trend of ‘tolerance’ by the domestic shareholder Western interest in Japan grows Q3 2021 saw several notable inbound acquisitions in Japan, driven by the trends above, including: Alphabet’s acquisition of Pring[4],a smart phone based fintech company, for USD 85m Paypal’s acquisition of Paidy[5], a provider of ‘buy now pay later’ solutions in Japan, for USD 2.7bn Footlocker’s acquisition of Atmos[6], a footwear retailer, for USD 360m Japan has a new Prime Minster Newly elected Fumio Kishida is a former banker, and provides a wealth of financial experience for Japan’s economy As Kishida prepares for a snap general election on October 31, the benchmark Nikkei Stock Average hit its highest level in 31 years[7] - amidst increasing confidence in the ruling coalition’s release of further fiscal stimulus This economic positivity provides a healthy back-drop for deal-making Outbound deals by sector (by %)[8] Outbound deals by region (by %)[9] Key M&A transactions in Q2 & Q3 Source for all key deals: Mergermarket (JPN), Mergermarket, 1 April to 30 September (criteria available on request) Company to watch Representative Transaction Date Announced Transaction Type Regions Sectors & Keywords Value (USDm) JERA Co., Inc. Aboitiz Power Corporation (27% Stake) 27/09/2021 Overseas acquisition Philippines Energy 1,580 SoftBank Revolut Limited 15/07/2021 Overseas acquisition (minority stake) United Kingdom Internet / e-commerce 800 Toyota Motor Corporation Level 5 26/04/2021 Overseas acquisition USA Technology & Software 550 Panasonic Blue Yonder, Inc. (80% Stake) 23/04/2021 Overseas acquisition USA Technology & Software 7,100 Sony & others Epic Games, Inc. 13/04/2021 Overseas acquisition USA Technology & Software 1,000 China A focus on tech The Chinese M&A market has seen venture capital and growth private equity firms gain momentum in the last two quarters, as tech dominated Chinese deals demonstrate strong performance[10] This performance of China focused tech deals has inspired confidence, driving a resurgence of outbound activity during the period Industrials also leading the way As demonstrated in the charts below, industrials sub-sectors such as automotive, semiconductor and materials space have remained the most favoured sectors among Chinese buyers (alongside tech & software). Just like Q1 2021, industrials led the way in Q2-3, representing 26% of all announced M&A activity in volume[11] Chinese M&A rebounds In addition to industrials, tech & software and healthcare also took 17% and 14% of all announced M&A activity in volume[12], respectively – a reflection of their strength throughout the pandemic Mainland Europe and the UK accounted for one third of outbound transactions, compared to nearly half in the preceding quarter[13]. The drop could be attributed to the UK (a notable 10% drop QoQ[14]) due to lingering political tensions and continued pandemic-induced flight suspensions Despite undertones of ongoing political tension, outbound deals between China and the US have significantly increased - a 13% uplift QoQ[15]. This shift could be driven by a renewed appetite for advanced computer technology and biotechnology Notable transactions in Q2 & 3 2021 include: A consortium of investors led by CBC Group acquired a 47% stake of South-Korea based Hugel - the listed botox maker - from Bain Capital[16] Tencent’s acquisition of British video game developer, Sumo[17] Gotion High-Tech’s acquisition of Bosch’s plant in Göttingen[18] As demonstrated below, Q2 & Q3 2021 maintained momentum from the previous quarter – in our view, driven by the rapid rebound from the pandemic, strong investment appetite and recovering corporate earnings in China. The number of total outbound M&A transactions in these two quarters reached 93, worth USD 25 bn[19] Outbound deals by sector (by %)[20] Outbound deals by region (by %)[21] Key M&A transactions in Q2 & Q3 Source for all key deals: Mergermarket (CHN), Mergermarket, 1 April to 30 September (criteria available on request) Company to watch Representative Transaction Date Announced Transaction Type Regions Sectors & Keywords Value (USDm) FountainVest Partners ZIWI Limited 20/09/2021 Overseas acquisition New Zealand Consumer, Leisure & Retail 1,057 CBC Group Hugel (46.85% Stake) 25/08/2021 Overseas acquisition South Korea Healthcare 1,479 Tencent Sumo Group (91.62% Stake) 19/07/2021 Overseas acquisition United Kingdom Technology & Software 1,161 CITIC Capital Quanergy Systems 22/06/2021 Overseas acquisition USA Technology & Software 970 Mindray Medical International HyTest 16/05/2021 Overseas acquisition Finland Healthcare 662 India India’s GDP growth rate for Q2 & 3 2021 is expected to be 7.9%, according to The Reserve Bank of India, with full financial year growth expected to reach 9.5% at year end[22] The economy gradually opened after mass vaccinations this period, and the encouraging signs of recovery from the ‘second wave’ dissipating, will likely have a positive knock-on effect for deal flow As demonstrated below, outbound deals in this period have largely been driven by the technology & healthcare sector. Technology deals, in our view, were driven by an appetite for capabilities such as data analytics, cloud infrastructure and digital application development. Whilst healthcare deals were driven by the acquisition of generic drugs company and manufacturing facilities The entry of crypto-unicorns The Indian start-up ecosystem is firing on all cylinders with 30 new unicorns (2021)[23]. These included the introduction of CoinDCX and Licious - the first crypto[24] and D2C brand[25] unicorns respectively India is tailing China with its adoption and drive in new age sectors, including e-commerce, social commerce, ed-tech, food-tech, and digital mobility This is attracting multiple investors and driving valuations higher, compounded by the performance of these sectors throughout Covid-19 restrictions and the subsequent public shift to a digital economy[26] Buyout transactions have been an area of focus for private equity funds in India for some time now, driven by low interest rates and volumes of cash[27] - recent examples include Barings Asia buyout of Hinduja Global[28] and Blackstone buyout of ASK[29], both billion USD transactions Pre-IPO and late stage transactions are also gaining traction[30], with funds conducting deals with a view to benefitting from near term IPO pops, for example Edelweiss & IIFL investment in Byju’s[31] and Temasek & Warburg Pincus’ investment in Ola[32] India continues to attract global funds due to its skilled workforce and economic growth prospects[33] eg TPG, Softbank, Accel are just a few of those actively pursuing transactions in India. This in turn has supported and, we believe, will continue to support, deal momentum, alongside India’s digital adoption and growth outlook Conglomerates lead consolidation Larger company consolidation for inorganic growth has been a trend in Q2 and Q3, highlighted by domestic M&A deal volumes 86% higher in Q3 YoY[34], particularly across ed-tech, insurance, logistics and e-commerce[35]. Conglomerates such as Reliance, have also been actively pursuing M&A opportunities, particularly in the tech & e-commerce sector, driving deal volumes across the space[36] Some notable M&A transactions include PayU’s acquisition of Bill desk[37] and Byju’s acquisition of Great Learning and Gradestack Learning[38] Outbound deals by sector (by %)[39] Outbound deals by region (by %)[40] Key M&A transactions in Q2 & Q3 Source for all key deals: Mergermarket (IND), Mergermarket, 1 April to 30 September (criteria available on request) Company to watch Representative Transaction Date Announced Transaction Type Regions Sectors & Keywords Value (USDm) Reliance Retail Ventures Just Dial Limited 16-July-2021 Domestic Acquisition India E-Commerce 960 PayU Billdesk 01-Sep-2021 Domestic Acquisition India FinTech 4700 HDFC Life Insurance Exide Life Insurance 03-Sep-2021 Domestic Acquisition India Financial Services 910 Think & Learn (Byju’s) Epic Creations Inc. 21-July-2021 Outbound Acquisition US Ed-Tech 500 Think & Learn (Byju’s) Great Lakes E-Learning 26-July-2021 Domestic Acquisition India Ed-Tech 600 Tata Sons Limited Tejas Networks 29-July-2021 Domestic Acquisition India Telecom 340 Delhivery SpotOn Logistics 30-July-2021 Domestic Acquisition India Logistics 210 South Korea Looking to the future Foreign acquisitions of Korean assets have continued to be relatively inactive in Q2 & Q3 2021 due to the impact of Covid-19 on overseas buyers. That said, a notable inbound M&A transaction during this period was Softbank Vision Fund’s 24.8% stake acquisition in Yanolja, a Korean operator and provider of online platform for travel and accommodation, for USD 1.6 bn[41] A key driver of deal flow has, however, been large conglomerates gearing up for post-pandemic growth by acquiring growth potential businesses in a buy-out spree. Some notable M&A transactions include E-mart’s 80% stake acquisition in eBay Korea (eBay’s e-commerce business in South Korea) for USD 2.9 bn[42], and Kakao’s acquisition of Croquis - a Korean operator of fashion shopping platform - for USD 865 m[43] The largest outbound investment destination in this period was the US - with sixteen deals worth USD 4 bn, accounting for 39% of all outbound deals. The US’ attractiveness as an investment destination is increasing based on its high economic growth rate and favourable business conditions, such as a low corporate tax rate Digital transformations drive deal flow Tech & software and consumer businesses led outbound deals in South Korea during this period, accounting for 44% of all outbound activity[44] Tech & software activity has been driven by investors’ interest in the digital transformation drive to adapt post-pandemic challenges, and the subsequently complex business environment. One of the notable outbound M&A transactions in this space was Kakao Entertainment’s 59.4% stake acquisition in Tapas Media - the third-largest US digital comics platform - for €282.8m[45] For the consumer, leisure & retail sector, Centroid Investment Partners’ acquisition of TaylorMade Golf Company - a leading global manufacturer of golf equipment, balls, bags and accessories - for €1.4bn[46] was the most notable outbound M&A transaction Outbound deals by sector (by %)[47] Outbound deals by region (by %)[48] Key M&A transactions in Q2 & Q3 Source for all key deals: Mergermarket (KOR), Mergermarket, 1 April to 15 September (criteria available on request) Company to watch Representative transaction Date announced Transaction type Regions Sectors & keywords Value (€m) Netmarble Corporation Spin X Games (100% Stake) 2021-08-02 Overseas acquisition South Korea / Hong Kong Technology & Software 1,844.2 Centroid Investment TaylorMade Golf Company, Inc. 2021-05-11 Overseas acquisition South Korea / USA Consumer, Leisure & Retail 1,407.3 HYBE Co. Ltd. Ithaca Holdings LLC 2021-04-02 Overseas acquisition South Korea / USA Business & Tech-Enabled Services 849.8 CJ Cheiljedang Corp. Schwan's Company (19% Stake) 2021-06-16 Overseas acquisition South Korea / USA Consumer, Leisure & Retail 362.2 SK Holdings Co., Ltd. VinCommerce General Trading Services JSC (16.26% Stake) 2021-04-06 Overseas acquisition South Korea / Vietnam Consumer, Leisure & Retail 346.5 Kakao Entertainment Co, Ltd. Tapas Media, Inc. (59.64% Stake) 2021-05-11 Overseas acquisition South Korea / USA Technology & Software 282.8 Southeast Asia The resurgence of M&A As observed in the last few quarters, Southeast Asia is expected to continue its strong deal making momentum for the rest of the year - with regional consolidations, large private equity war chests, Special Purpose Acquisition Companies (SPACs) and economic recovery being the key drivers for deal activity. Cross-border activity is also expected to rebound sharply as overseas investors seek to capitalise on the region’s vast economic potential[49] Southeast Asian M&A activity saw strong recovery in Q2 & Q3 despite the Covid-19 Delta variant causing renewed lockdowns within the region[50] With rising vaccination rates across major Southeast Asian countries and measures put in place to tackle Covid-19 as an ‘endemic’, companies are rebounding and banks have increased their willingness to lend, which has eased overall deal making[51] Furthermore, regional deal values have benefitted significantly from the US SPAC boom in the quarter, for example, the merger of Singapore-based ride-hailing giant, Grab with SPAC Altimeter Growth Corp for USD 40 bn[52] Like Q1 2021, intra-Asia deals continued to dominate in Q2-3, with 42 deals accounting for 47% of all outbound deals[53] Spotlight on Vietnam Despite the escalating pandemic status and subsequent lockdowns, investors continue to be attracted by Vietnamese companies as the strong expected annual GDP growth of c.5%[54] denotes ‘potential’ As such, the Vietnamese M&A landscape saw a 30% growth in deal volume in Q2 & Q3 2021 YoY[55] as investors continue to be confident in the country’s growth potential and outlook The financial services sector continues to be a key driver in this M&A uptick, as proven in Q2 & Q3 with the likes of SMBC Consumer Finance Co., Ltd’s 49% stake acquisition in VPBank Finance Company Limited from Vietnam Prosperity Joint-Stock Commercial Bank[56], and Bank of Ayudhya Plc’s acquisition of SHB Finance by from Saigon-Hanoi Commercial Joint Stock Bank[57] With consumer finance licenses limited in supply and heavily regulated in Vietnam, foreign investors have been aggressively bidding for Vietnamese consumer finance companies in hopes to secure their place in the fast-growing Vietnamese consumer finance market[58] Outbound deals by sector (by %)[59] Outbound deals by region (by %)[60] Key M&A transactions in Q2 & Q3 Source for all key deals: Mergermarket (SEA), Mergermarket, 1 April to 30 September (criteria available on request) Company to watch Representative transaction Date announced Transaction type Regions Sectors & keywords Value (USDm) Grab Holdings Inc Altimeter Growth Corporation 13/04/2021 Overseas acquisition Singapore / US Technology & Software 34,690 PT Aplikasi Karya Anak Bangsa PT Tokopedia 17/05/2021 Domestic acquisition Indonesia Technology & Software 7,560 PTT Global Chemical Pcl Allnex GmbH 12/07/2021 Overseas acquisition Thailand / Germany Chemicals/ materials 4,747 Axiata Group Bhd Celcom Axiata Bhd 21/06/2021 Domestic acquisition Malaysia Telecommunications 4,291 FinAccel Pte Ltd. VPC Impact Acquisition Holdings II 02/08/2021 Overseas acquisition Singapore / US Financial Services 2,000 JERA Co., Inc. Aboitiz Power Corporation (27% Stake) 27/09/2021 Overseas acquisition Japan / Philippines Energy 1,580 SMBC Consumer Finance Co., Ltd. VPBank Finance Company Limited (49% stake) 28/04/2021 Overseas acquisition Japan / Vietnam Financial Services 1,372 To view sources for this publication, click here What to read next INSIGHT Asia Access Quarterly Q2 & Q3 2021: Japan's renewable energy ambition October 26, 2021 DEAL ANNOUNCEMENT DC Advisory advised Okabe on its acquisition of Vimco Manufacturing October 07, 2021 Back to News, Deals & Insights ASIA ACCESS TEAM & KEY CONTACTS IN ASIA UNITED KINGDOM Tosh Kojima UNITED KINGDOM Endong Zhai UNITED KINGDOM Shinya Nakamura UNITED KINGDOM Aya Yokouchi UNITED KINGDOM Jason Li UNITED KINGDOM Yoshi Nakamura UNITED STATES Satoshi Ishiguro UNITED STATES Naoto Osugi JAPAN Hiroo Makino JAPAN Koki Kaita CHINA Clementine Chen SINGAPORE Shao Ping Lee SOUTH KOREA Youngjin Lee THAILAND Poonlap Chantavongviriya INDIA Klaas Oskam © DC Advisory 2021 I would like to receive communications about DC Advisory products, services, events and matters of interest. 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