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The year 2020 – A TALE OF TWO HALVES



Overall M&A activity was extremely robust, increasing 11.5 per cent for the full year as deal momentum rebounded in the second half of the year, notwithstanding the significant global disruption caused by COVID-19.


• Deal flow was boosted by several mega acquisitions in China, Japan, Thailand and Indonesia as well as buoyant activity in Australia and India.

• However activity data was inflated by a number of jumbo domestic transactions in China that arose due to a more-domestic focus by the government and a re-organisation of the economy to a more market driven system.

• Trade war and geopolitical issues continue to impact China and cross border deal flows with outbound transactions plunging 48.6 per cent.

• Geopolitical issues led to lengthening regulatory approval times and the cancellation of several deals (e.g. rejection of outbound transactions from China into Australia by FIRB) as well as some MNCs exiting their China operations.

This led to buyers looking elsewhere with India providing a popular destination, particularly among technology companies and PE firms with KKR, Baring PE and Blackstone completing Indian investments in the third and fourth quarter of calendar 2020.

• PE backed M&A activity was remarkably resilient in 2020, despite COVID and debt markets opening and closing sporadically throughout the year, particularly in the first half.

Transaction volumes (>$US100 million) increased 2.1 per cent to $US63.8 billion year on year with deal count decreasing slightly (-3 per cent year on year).

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Overall M&A: Number and Value of Deals,  APAC (ex Japan) >$US100 million

Source: Merger Market


PE Backed M&A: Number and Value of Deals, APAC (ex Japan) >$US100 million

Source: Merger Market


M&A Multiples: APAC (ex Japan) >$US100 million

Source: Merger Market, Preqin, Loan Connector


M&A by Sector: APAC (ex Japan) >$US100 million

• M&A in the technology sector continued to be the standout sector - a trend that has remained unchanged since 2015 and is expected to continue into 2021.

Cloud technology and analytics were the top targets as companies sought to prioritise remote working capabilities and leverage data to increase efficiency and grow revenue.

Healthcare continued to remain active particularly in the midst of a global pandemic with a slight YoY increase in activity.

• Energy, mining and utilities M&A was also very active this year accounting for 31 per cent of total China and Hong Kong activity; however, the volume was skewed by a few large domestic transactions in China.

• On the consumer side, foreign supermarket operators continue to exit the region as competition intensifies with e-commerce companies continuing to grab market share and the difficulties in operating without local partners.

• However, the resilient overall market did not boost loan market volumes with the volume of M&A loans falling 14.2 per cent. This was driven by declines seen in historically strong markets such as Singapore, China and Hong Kong which

declined 30.9 per cent, 25.2 per cent and 15.5 per cent respectively against increases in Australia (+1.1 per cent year on year), Indonesia and Thailand (both +11.5 per cent year on year). LBO loans for PE firms also fell 32.4 per cent year on year.

• There were a few key factors impacting this:

- Buoyant public markets resulting in a number of M&A transactions funded via shares;

- Ongoing high number of minority deals for PE, which do not generally lend themselves to target level financing opportunities, with Hillhouse, KKR, Fountainvest and CVC particularly active;

- Some fully equity funded deals (e.g. Permira/EF) with sponsors taking a view that they can get a better deal in 2021, post Covid.

• Business uncertainty and concern regarding potential liquidity issues led to an increase in pricing in the early part of the year. While pricing in the second half gradually reduced, it remains slightly elevated over 2019 levels together with a slight contraction in leverage levels.

notable deals 







Asia Pacific M&A is expected to remain strong in 2021 given a supportive macro environment, including:

• Record low interest rates;

• USD weakness;

• Willingness of equity investors to pay for growth in a low growth environment;

• Resumption of sale processes postponed due to COVID;

• The substantial amount of liquidity in the system.

• COVID has had minimal impact on fundraising in 2020. In fact, it has probably strengthened the position of the well regarded Global and

Asia Pacific funds, a number of whom undertook notable fund raisings in 2019. These included Permira’s $US12 billion VII global buyout fund and Warburg Pincus’  $US4.2 billion China-Southeast Asia II fund. There is now an estimated $US2.8 trillion of capital committed to PE funds globally, including almost $US1trillion dedicated to buyouts.

• Significant growth opportunities will be available in the APAC region and, increasingly, investors are demanding a certain proportion of investments to be allocated to the region.

• PE firms will continue to shift away from focusing purely on buyouts towards becoming investment houses with broad offerings in alternative assets such as infrastructure, real estate, Tech, data centres covering control and minority investments.

• Environmental, social and corporate governance (ESG) will become increasingly important due to new regulations as well as demand from stakeholders who are requiring greater transparency and increased scrutiny on ESG issues.

• The trend of large conglomerates divesting local/regional divisions will continue, with Philips and Unilever coming to the market in the first half.

• India and Southeast Asia countries are expected to benefit from trade war and geopolitical tensions in China, and from companies looking to diversify their supply chains.

• Of course, risks remain including ongoing geopolitical tensions, trade wars and growing protectionism between the US and China are likely to negatively impact cross-border activity with Chinese deal making continuing to shift towards a domestic focus.





The global DC market has experienced consistent growth over the last few years (forecast CAGR ~10 to 28 per cent depending on region and segment) and has been one of the industries that has benefited during the COVID 19 pandemic for a number of reasons including prioritisation of remote working capabilities and an increase in in-home entertainment such as media streaming and gaming.

This builds on underlying demand driven by the rollout of 5G, increase in mobile devices and expanding internet connectivity.

• This has led to an increase in M&A and investment activity in the space as well as an acceleration in the development of new DCs primarily by established carrier-neutral third party operators but also PE fund and REIT backed entities.

Several notable transactions by PE funds in 2020 include:

- Stonepeak investing USD1bn alongside ex-Equinix executives to establish APAC DC operator Digital Edge.

- DCP Capital partnering with CITIC Private Equity to lead a $US300 million investment in Hotwon Group

- Gaw Capital closing $US1.3 billion funding for its China DC investment initiative

- Blackstone investing $US150 million in 21 Vianet

- Hillhouse investing $US400 millio in GDS

- Bain Capital’s $US540 millio NASDAQ IPO of Chindata

• In parallel, we are seeing telcos and large companies entering into sale and lease-back arrangements with third-party operators/funds/REITs to optimise balance -sheet structure and manage the large capex and ongoing maintenance requirements for DCs. As an example, in August 2020 Telstra sold its DC in Melbourne to Centuria Industria REIT for $A416.7 million with a 30-year lease back to Telstra.



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