The M&A landscape in Asia is booming at present, and this is leading to an increased demand for high-quality transactional lawyers to offer top-notch advice on deals. The Dealmakers of Asia feature profiles a number of key M&A lawyers across various markets in the region.

According to Reuters, the top global M&A trend in the last quarter has been the shift from big deals to small. The value of mergers and acquisitions globally dropped slightly in the third quarter of 2017, as big deals worth more than $10 billion were scarce given uncertainty about economic policy in the U.S. and Europe in particular, leaving dealmakers to feast on a plethora of smaller transactions.

Even as major stock markets continued to climb higher, big companies were wary of pursuing transformative deals in the quarter, as the future of U.S. President Donald Trump’s agenda on taxes, healthcare and infrastructure spending remained unclear, while Britain’s Brexit talks, and North Korean’s nuclear ambitions also weighed on chief executives’ appetite to take risks.

 “Jumbo deals have subsided in part because of the continued uncertainty over tax policy and deregulation - removing that overhang would be a positive catalyst for M&A,” says Matt McClure, Americas head of mergers & acquisitions at Goldman Sachs Group Inc. “Even if it becomes clearer that the status quo isn’t going to change soon, you may see companies revisit larger transactions that they have put on hold.”

The value of global merger and acquisitions slipped to $765 billion in the third quarter, down 5 percent year-on-year and the lowest third-quarter level since 2013, according to preliminary Thomson Reuters data.

“It’s a big bet to pursue a mega-deal in this environment and boards need more time to act. For sub-$5 billion deals, instead, there are fewer hurdles and it’s easier to get to the finish line,” said Steven Baronoff, chairman of global M&A at Bank of America.

The biggest deal to be signed in the third quarter was the U.S. aerospace and industrial company United Technologies Corp’s $30 billion cash-and-stock acquisition of U.S. avionics maker Rockwell Collins.

“After the summer break there has been no big rush to get‎ the ball rolling on deals. This could be a sign that activity will remain flat or subdued and political uncertainty will continue holding back large transactions,” says Scott Hopkins, an M&A Partner at Skadden, Arps, Slate, Meagher & Flom in London.

Third-quarter M&A volume fell to $309 billion in the United States, down 6 percent year-on-year. In Europe, M&A totalled $343 billion, down 15 percent year-on-year, while in Asia, M&A was 226 billion, up 11 percent year-on-year.

“The market for deals overall has held up well, given the rich valuations and macroeconomic and geopolitical uncertainty,” says Mark Shafir, co-head of global M&A at Citigroup.

However, private equity firms defied expensive valuations and took advantage of cheap debt financing terms to spend the mountains of cash they have raised from investors on acquisitions. Global private equity-backed M&A activity has reached $212 billion year-to-date 2017, a 25 percent increase compared to last year and the highest since 2007.

M&A in the energy and power sector hit a two-year high of $362 billion so far in 2017, up 7 percent over the same year-to-date period in 2016. M&A in the industrials sector totalled a record-breaking $326 billion so far during 2017, up 21 percent compared to last year at this time.

SOUTHEAST ASIA

According to data from Mergermarket, there were 290 deals in Southeast Asia in the first three quarters of this year, worth $53.5 billion in total. In terms of deal value, this was the strongest first nine months the region has seen since the same period in 2013. 

The third quarter itself saw 97 M&A deals worth $26.7 billion in Southeast Asia, an increase of 81.8 percent from the same period in 2016. In fact, the quarter saw three of the region’s top five deals this year. These were the acquisition of Global Logistic Properties, a $2-billion stake purchase in Grab and the acquisition of a 47.5 percent stake in Energy Development Corporation for $1.3 billion. 

One of the key drivers behind this M&A boom was the Internet/e-commerce space. A total of 13 deals worth $5.3 billion have been inked in this sub-sector so far this year, a nearly four-fold increase in value compared to the same period of 2016, which saw seven deals worth $1.1 billion. Deals in the Internet/e-commerce space accounted for 9.9 percent of the total M&A transaction value in the first nine months of this year.

CHINA

According to Reuters, the value of Chinese overseas merger-and-acquisition (M&A) deals jumped in the third quarter after several large transactions, and dealmakers expect continued momentum as recovering economic fundamentals damp the need for restrictions on capital outflows.

Overseas deals this year by Asia-Pacific’s most active buyers reached $118 billion at September-end, nearly half of which were announced in the past three months, Thomson Reuters data showed.

But the amount is 29 percent lower than the same period of 2016, a year in which a record $221 billion was spent on assets as varied as movie studios and soccer clubs. Such was the buying that China’s government began placing restrictions on overseas deals to stop huge outflows of funds destabilizing the yuan.

The yuan has since stabilized, while China’s foreign reserves have risen. The government has also been encouraging deals which support its Belt and Road initiative, whereby it aims to create a modern-day equivalent to the ancient Silk Road international trading network.

As such, investors are scouting for deals in anticipation of the government relaxing restrictions on overseas M&As, bankers and dealmakers told Reuters.

“Through the summer, on average, every week we have a new deal to look at. I’ve never seen this kind of activity before,” says Fred Hu, chairman of private equity firm Primavera Capital. “Now the exchange rate has stabilized. The yuan has appreciated. There’s also China’s longer-term geopolitical ambition - one belt, one road. If you retain capital controls, how do you obtain long-term objectives?”