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Asia's M&A boom leaves old guard in charge

Quentin Webb HONG KONG | Updated on January 24, 2018 Published on July 07, 2015

Asia's dealmakers look set for a trillion-dollar year. Firms in Asia-Pacific excluding Japan were involved in a record $590 billion of mergers and acquisitions in the first half of this year, Thomson Reuters data shows. However, the bonanza offers shareholders less than they might hope.

An M&A boom should benefit investors in several ways. They are more likely to get a premium offer for their stock. An active market for "corporate control" keeps bosses on their toes. Consolidation curbs competition, making whole industries more profitable. And the rare acquirer that doesn't overpay can also create value for its shareholders.

That's the theory, anyway. Problem is Asian governments and tycoons tend to call the shots. Even more than in continental European markets like France and Italy, controlling shareholders render most big listed companies bid-proof. The biggest deals in Asia so far this year involve Asia's richest man, Li Ka-shing, reshaping his empire and bulking up in European telecoms, plus reshuffles at Korean conglomerates SK Group and Samsung.

To make things worse, the region has a sorry tradition of short-changing minority investors. Cheil Industries, the de facto holding company for Samsung's ruling Lee family, made a low-ball, $9 billion bid for affiliate Samsung C&T . Vedanta's $2 billion bid for subsidiary Cairn India will offer an early test of new rules meant to offer Indian minority shareholders better protection. The Chinese tech firms planning U.S. management buyouts with a view to relisting back at home could also court controversy. It was certainly brave for the group seeking to swallow online dating site Jiayuan to call its bid vehicle Vast Profit Holdings.

So bankers do best, then? Again, up to a point. More deals bypass banks: almost 37 per cent of the region's deals by value last year had no financial adviser, Thomson Reuters data show, versus 13 per cent Stateside. Even when bankers do get hired, they often make less, especially in China. Freeman & Co reckons big domestic deals in China pay maximum fees of 0.35 per cent of the deal's value, against 0.82 per cent in the United States. Not all merger booms are created equal.

(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)



CONTEXT NEWS

Companies announced $2.2 trillion of mergers and acquisitions in the first six months of 2015, according to Thomson Reuters data, marking the strongest first half to a year since 2007.

M&A involving companies in the Asia-Pacific region outside Japan leapt 74 per cent to a record $590 billion. Hong Kong tycoon Li Ka-shing accounted for three of Asia's four biggest deals, reshuffling his business empire and buying British mobile firm O2 in transactions worth a combined $96 billion.

Second-quarter M&A close to record amid mega deals



Published on July 07, 2015
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