China, India Asia’s Top M&A Destination

SHANGHAI ~ China and India are Asia’s top destination for mergers and acquisitions, a new survey says, underscoring the huge potential of their burgeoning financial sectors.

“China and India still remain the top two targets for M&A in the region due to underlying economic growth conditions,” an annual report presented this week by financial advisory firm PricewaterhouseCoopers said.

The survey, which polled 230 senior financial executives in Asia, Europe, North America and the Middle East, showed interest in India had increased slightly from 37 percent in 2005 to 39 percent in 2007.

By comparison 47 percent of executives answered that they expected to execute a merger or buyout in China over the next five years.

While the two Asian giants were expected to drive many of the deals in the region, Taiwan, Pakistan and Vietnam were also fast emerging as M and A markets, the report said.

Managers also signaled particularly strong expectations for Hong Kong, Singapore and Indonesia over the next five years.

Among those surveyed, nearly three quarters predicted that their companies would undergo a significant merger or acquisition some time in the next five years, up from 68 percent last year.

Already transaction value in Asia last year totaled US$64 billion, a jump of 66 percent from 2005.

“Unlike the European market, the dominant domestic players in the more mature markets in particular areas of Asia are yet to fully flex their muscles on a regional basis,” the report said.

Christopher Chan, a partner at PricewaterhouseCoopers based in Hong Kong said: “Although growth might be shifting in terms of key markets, the survey has confirmed that Asia is still the ‘home of growth.'”

Matthew Phillips, also a partner at the firm, told reporters in Shanghai that despite concerns over the often poorer regulatory environment, firms were keen to push ahead.

“What changed here is people’s preparedness to the deals despite the regulations that are in place. The sentiment is clearly up and therefore pricing has become a much more significant risk.”

Phillips added that China was a slight exception due to its particularly opaque regulatory environment, which is “always a point of frustration for foreign investment.”

Forty-two percent of executives cited regulatory uncertainty as a barrier in China, compared to 23 percent for Asia.

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