Asian firms targeted

The economic crisis in the Asia Pacific region has caused an unprecedented wave of mergers and acquisitions, with European multinationals at the forefront of this activity. The crisis has unlocked assets previously held by family conglomerates, which are now being forced to liquidate assets to reduce debt burdens. The barrier holding back an even greater […]

The economic crisis in the Asia Pacific region has caused an unprecedented wave of mergers and acquisitions, with European multinationals at the forefront of this activity.

The crisis has unlocked assets previously held by family conglomerates, which are now being forced to liquidate assets to reduce debt burdens.

The barrier holding back an even greater flood of transactions is price, as Asian sellers seek higher-than-market-value prices for assets. Owners have not yet accepted the new values and the need to relinquish control.

Schroders director Ian Carnegie-Brown said: ‘Schroders is selling a significant number of assets, just one of which is worth $1bn (£0.6bn), and many are in the $100m to $200m range. I estimate about 50 deals have been completed so far this year ranging between $50m $100m.

‘Major multinationals have not been turned off their Asian strategies by the economic crisis; indeed it allowed them to leap-frog the implementation of their strategies. Investors have a long-term perspective on Asia and are not bothered by short-term economic trends.

‘This time last year, multinationals were being forced into joint ventures with their local partners calling the shots. Today, many local joint venture partners are only too pleased to sell out to their overseas partners.’

The South Korean market had been relatively protected, but is now more open to overseas firms. Notable deals include German company BASF buying Lysine, a subsidiary of Daesang, for $600m; South Korean conglomerate Doosan selling its interests in the Korean operations of Nestle, 3M, Kodak and Coca-Cola for $732m; Proctor & Gamble buying Ssangyong Paper for $350m; and US-based power producer AES buying the power assets of Hanwha Energy for $800m.

Buyers are often acquiring plants equipped with machinery, set up during the country’s incredible investment boom in the early to mid-1990s.

Assets are available in all industrial sectors, with a strong focus on retail and manufacturing, especially export orientated.

In the steel, chemicals and shipbuilding manufacturing sectors there is surplus capacity in East Asia, but many companies are looking 10 years ahead. They believe that in three to four years the excess capacity will be taken up.

While acquisitions and mergers proceed, rationalisations and closures are becoming widespread.

This process will irrevocably alter Asia’s corporate landscape; out go the politically appointed, corrupt managers operating within official monopolies, especially in Indonesia and Thailand; in will come professional managers in a free international market.

Ed Weiss