Recent headlines such as “With M&A Hit, Wall Street Bankers Keep Busy With Stock Sales” (Bloomberg, 28 May), “Bankers fear sustained M&A slump: ‘It’s impossible without face-to-face meetings’” (Financial News, 8 June) and “Pandemic fears grip M&A as deal making slumps to 23-year low in Europe” (MarketWatch, 30 June) suggest a very depressed market for corporate transactions this year.

However, the numbers in Asia-Pacific tell a different story: (more…)

Transaction volumes continue to trend at high levels across the region. The chart below shows deal announcements this year (annualised) compared with the average since 2006:

One market stands out in particular: (more…)

We look at the current opportunity set in Asia-Pacific M&A, and how it has changed since the onset of the pandemic.

The figure below shows the cancellation / completion ratio of Asia-Pacific deals going back twenty years. The chart shows how this year has been a huge outlier, with the ratio moving well above two times, compared with a historical range rarely exceeding one. In other words, in 2020, more than two deals have been cancelled for every deal that has completed. This indicates the scale of the disruption in the M&A space this year.

M&A cancel / complete ratio (x)

What does this imply for M&A investment returns for the rest of the year? We think they will be strongly positive for the following reasons: (more…)

The Covid-19 crisis has created a perfect storm for global M&A:

• Earnings are falling precipitously. Acquirers are calling off deals by invoking Material Adverse Change (MAC) clauses. Many transactions have either broken or widened out to spreads of 30% to 70%.
• Even less-risky deals are seeing much wider spreads due to forced de-leveraging. For example, we saw annualised returns in Japan which have been around 2-3% for months blow out to 40%+ at one point.

The disruption in the M&A space has been more severe than during the GFC, as this time the correction has been stunningly abrupt. (more…)