Deal Drivers: APAC HY 2021

Deal Drivers: APAC HY 2021 A spotlight on mergers and acquisitions trends in 2021 Contents Foreword: APAC an M&A bright spot despite COVID concerns 03 Outlook: APAC heat chart 04 All sectors 05 Consumer 14 Energy, mining & utilities 19 Financial services 24 Industrials & chemicals 29 Pharma, medical & biotech 34 Telecoms, media & technology 39 About this report 44 Foreword: APAC an M&A bright spot despite COVID concerns Having experienced the first wave of COVID-19 before the rest Robust activity of the world in the early months of 2020, countries across the Nevertheless, reasons to be optimistic remain. Vaccinations Asia Pacific (APAC) region hoped the post-pandemic trajectory in much of the region are now gathering pace, providing hope of recovery would continue smoothly during 2021. But while of an escape from the pandemic. The economic backdrop some parts of the region have seen no significant return of the is supportive too, with central banks across the region virus, with China in particular keeping cases to a minimum, maintaining loose monetary policies that look set to endure others have seen surging case numbers in recent months. into 2022. And there is certainly no shortage of capital to India has faced particular issues, but countries such as fund transactions. Singapore and Australia have also reported outbreaks despite tough restrictions. Despite a small quarter-on-quarter drop from Q1 to Q2 of this year, deal activity was still strong over the first half of 2021. Inevitably, this ongoing COVID-19 uncertainty has undermined There were 2,198 transactions up to the end of June—not confidence in some parts of the region. The International only was this a 17% increase year-on-year, but was above the Monetary Fund published its most recent forecasts for global 2,022 deals recorded in H1 2019, before the pandemic. economic growth in April, and upgraded its expectations of a number of APAC economies. Value was even more robust, with US$557.3bn worth of deals announced across the first half of this year. This represents a 93% rise on H1 2020 and nearly matches the Since then, however, rising case numbers— US$557.6bn in M&A activity seen in H2 2020. and limited vaccination programs in several countries—have prompted warnings those Against this backdrop—and assuming no serious escalation projections may be too optimistic. of the COVID-19 pandemic—M&A activity has the potential to accelerate once again, and to eclipse the elevated levels of dealmaking seen prior to the crisis. 3 Outlook: Heat chart based on potential companies for sale APAC heat chart Greater China Greater South Korea Japan India Southeast Asia & Australia Zealand New TOTAL Two sectors above all look set to be hotbeds of M&A activity Industrials & chemicals 399 53 30 36 56 22 596 in the APAC region during the second half of the year: Mergermarket’s analysis of ‘companies for sale’ stories over TMT 272 60 33 55 69 62 551 the first six months of 2021 suggests the industrials and chemicals (I&C) and technology, media and telecoms (TMT) Consumer 125 33 21 39 55 78 351 sectors will lead the way. Business services 176 9 30 21 38 36 310 In I&C, Mergermarket tracked 596 stories about potential targets in a sector that has seen consolidation on a global Pharma, medical & biotech 129 19 17 29 31 30 255 scale, particularly following the disruptions of the COVID-19 crisis. TMT targets, meanwhile, featured in 551 companies for Energy, mining & utilities 125 4 4 16 46 37 232 sale stories; the industry’s resilience during the pandemic and its crucial role in broader digital transformation continue to Financial services 95 13 11 29 50 30 228 attract attention. Between them, I&C and TMT accounted for more than a third Real estate 84 4 6 4 40 4 142 of all M&A coverage during the first half of the year. Only consumer (351 stories) and business services (310) came Construction 81 4 2 7 28 1 123 close to generating similar levels of speculation. Transportation 45 12 6 9 26 13 111 Geographical analysis suggests China is set to again dominate M&A activity during the second half of the year. The Leisure 38 14 9 4 25 21 111 Cold Warm Hot Greater China region, now in post-pandemic recovery mode, accounted for 1,588 companies for sale stories in the first Agriculture 16 1 1 1 18 17 54 Note: The Intelligence Heat Charts are based on half—that was more than half of all such stories. Chinese ‘companies for sale’ tracked by Mergermarket in targets featured prominently in every single industry sector. Defense 3 2 5 the respective regions between January 01, 2021 and June 30, 2021. Opportunities are captured according to the dominant geography and sector TOTAL 1,588 226 170 252 482 351 3,069 Source:of the Mergermarket potential target company. 4 All sectors Deal activity slows after H2 rebound, despite strong macro tailwinds M&A activity in the APAC region continued to perform strongly In this environment, the APAC region recorded 2,198 M&A All sectors M&A activity, in the first half of 2021. Both deal values and volumes were transactions during the first six months of 2021, worth a 2018 - HY 2021 significantly higher than in the same period a year ago when total of US$557.3bn. Compared to the first half of 2020, that the COVID-19 pandemic forced large parts of the region to represented a 17% increase in deal volumes and a 93% rise in impose tough lockdown restrictions on their economy. aggregate value. 1,400 400 350 The first half did not quite match the strength of the last 1,200 While COVID-19 uncertainties remain—with six months of last year, when volumes and values totaled patchy progress on vaccination programs 2,418 deals worth US$557.6bn. However, the strength of the 300 across APAC—the market backdrop has M&A market across the APAC region continues to compare 1,000 been supportive of dealmaking. favorably by historical standards, with activity now having 250 US$(bn) value Deal returned to—and often exceeding—pre-pandemic levels. 800 200 One driver of M&A has been the strength of the economic Deal volume Deal 600 bounceback—the International Monetary Fund predicts 150 economic growth of 6.9% for Asia during 2021, compared to a contraction of 2.2% last year. In addition, both corporates 400 100 and private equity (PE) firms are sitting on record cash piles, having been unable to deploy this capital during the crisis. 200 50 Accommodating monetary policies provide affordable access to further funding for those dealmakers who need it. 0 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2018 2019 2020 2021 Deal volume Deal value US$(bn) Source: Mergermarket 6 Private equity boosts activity All sectors top sectors by value I HY 2021 Elevated dealmaking activity in the PE industry was a US$(m) particularly important element of this story, with both new TMT 157,338 investments and exits increasing sharply on last year’s levels. Construction 142,993 Clearly, PE firms are anxious to deploy the record amounts Industrials & chemicals 55,902 of dry powder they have amassed—and to reassess their Energy, mining & utilities 43,916 portfolios following a year in which decisions often had to Real estate 33,260 be delayed. All sectors top sectors by volume I HY 2021 PE firms invested in 340 buyouts worth US$128bn in aggregate during the first half of 2021; that was a 31% rise in Deal count deal volumes compared to a year ago and a remarkable 128% Industrials & chemicals 446 increase in deal values. This recovery in PE buyout activity TMT 434 actually began in the second half of last year, which saw Business services 207 330 transactions worth US$67 billion, but has continued to Energy, mining & utilities 204 Consumer 175 accelerate in 2021. Exit activity has pursued a similar trajectory. PE firms made All sectors top bidders by value I HY 2021 149 disposals worth US$29bn during the first half of 2021. US$(m) In value terms, that eclipsed the US$25bn worth of exits China 251,413 achieved during the whole of last year. USA 88,719 Australia 40,469 Indeed, PE investors have been active at every level of the Japan 25,946 M&A market, from the smallest deals to the very largest. That India 24,855 includes the second largest transaction of all in the APAC region over the first half of the year, the US$34.7bn merger All sectors top bidders by volume I HY 2021 between Altimeter Growth, a US-listed special purpose acquisitions company (SPAC), and Singapore-based app Deal count developer Grab Holdings. The deal includes investment from China 810 a number of PE firms, as well as from Altimeter Capital, the PE Japan 257 firm backing the SPAC. South Korea 217 Australia 195 USA 172 7 Megadeal pushes up construction value All sectors top 10 announced deals, HY 2021 Only one deal eclipsed the Altimeter/Grab transaction, though it did so by some margin. In April, two of China’s state-owned Announced Bidder company Target company Target Vendor company Deal value infrastructure giants, Sichuan Railway Investment Group and date dominant (US$m) Sichuan Transportation Investment Group, announced a mega sector US$111.5bn merger to form the Shudao Investment Group. 1 02-Apr-21 Sichuan Railway Investment Group Sichuan Transportation Investment Construction 111,535 Co., Ltd.

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