Announced M&A activity across the Asia Pacific (excluding Japan) in the first quarter of the year is 9.7% up on the same time last year, according to the latest Thomson Reuters First Quarter Preliminary Review.

The total value of activity was US$129bn, representing the busiest start to the year since Q1 2008.China remains the most active market for M&A activity in the region, accounting for US$27bn or 30.9% of all Asia Pacific M&A activity, while Australia has come in at second place on US$16.6bn. “There is no doubt that China is key in terms of investments for both  private equity and corporate players,” said David Eliakim, M&A partner at Mallesons Stephen Jaques.

Australian-involvement announced M&A activity to date saw 369 deals with total value amounting to US$38.8bn, more than double compared to the first quarter volume in 2010, when the corresponding total was US$16.2 bn. However, Eliakim noted that the high Australian dollar was having an effect on local activity. “In a sense inbound M&A started slow because of the Australian dollar price increase - it made things here very expensive to buy,” he said. Cross border acquisitions into Australia are down 51% compared to the same time last year, accounting for US$1bn worth of transactions. The main industries to be targeted were real estate (38.5%) and materials (21.9%). Elaikim said most of the inbound interest into Australia has come from Chinese investors and North American pension funds. “They have shown a lot of interest in infrastructure assets and agriculture in particular and to a lesser extent resources,” he said. 

By contrast, the outbound Australian M&A market has seen a six-fold increase since the same time last year, with announced deal value reaching US$11.3bn. This represents the busiest start to the year for the outbound market since the first quarter of 2007.  The majority of outbound deals focused on minerals and resources, accounting for US$4.9bn or 43.5% of the market. “International and Australian miners are very interested in Africa; it’s very much an untapped market,” he said.

Overall, Elaikim is very confident in a busy M&A year ahead. “We think 2011 is going to be significantly better than 2010, and the year before that,” he said. Companies and PE funds are again gaining access to funds and debt, but they are still very cautious. “Boards are far more conservative than they were pre-GFC in taking on those opportunities in the market,” he said. There is still a lot of work coming through as a result of the GFC providing a constant reminder to companies about the dangers of over expansion. “Two big deals that have been announced are the result of the GFC, (Centro and Alinta). There is still a big chunk of M&A work from the GFC fall out,” he said. 

Top five Asia Pacific involvement announced deals (value)

Any Australian involvement announced M&A by Industries          

Top five Asia Pacific (ex-Japan) targeted nations for M&A (announced)