Asia-Pacific did not escape a worldwide slow-down in capital markets and M&A activity in the first quarter of 2023, but the absolute figures mask pockets of growth, including a stable and growing market for smaller corporate acquisitions, continued appetite for initial public offerings and SPAC combinations, and a robust bond market, albeit propped up by large Chinese issuances.
- Miners give shelter amid worldwide M&A jitters.
- ECM favour smaller issuers with 6% growth by deal numbers.
- Region takes 68% of global IPO proceeds.
- PRC props DCM boom with six top bond deals.
Corporate M&A deals involving Asian companies (excluding Japan) fell sharply in the first three months of 2023, to reach just $189bn, 23% lower than the same period last year and the slowest first quarter period since 2014. Completed M&A advisory fees in the region fell by almost half to $564bn.
Target M&A in China fell relatively modestly, by 7.5% to $69bn, while deals targeting Indian companies dropped sharply by 70% to $8.4bn (although the number of deals fell a modest 3%). Even so, China and India combined managed to take a 60% share of emerging markets M&A in the first quarter, up from 46% a year ago.
The Materials sector accounted for more than a quarter of the total value, with $42bn of deals, led by the $18.5bn Newmont acquisition of Newcrest Mining. The deal also helped Australian-involvement M&A leap 14% on the same period last year, to $40bn, the country’s strongest Q1 since 2007.
Meanwhile, Asia-Pacific’s second most active sector for M&A, Industrials, grew 12% on the year to $26bn, representing a 16% market share. Falling into third place, High-tech sector M&A totaled $16bn, just under a tenth of the market, a fall of 59% year-on-year.
Asia-Pacific SPACs announced at least 11 combinations between January and March, totaling $9bn, up 45% by value. By contrast, that other form of ‘blank cheque’ investor – private equity firms – retreated from the market, investing just $20bn in Asia-Pacific companies, down 59% from a year ago, the lowest first quarter since 2020.
Can grassroots growth boost ECM?
In line with global trends, Asia-Pacific equity issuance was sharply down during the first quarter, touching a three-year low of $61bn, a year-on-year fall of 14%. In turn, equity underwriting fees took a hit of 18% compared to a year ago, to bring in just $1.6bn, the lowest Q1 fee-haul since 2020.
More optimistically, while large deals were scarce, the number of equity issuances grew by 6% on the year, suggesting a growing sense of opportunity in the region’s economic hinterlands.
Several regions also increased their ECM activity in absolute terms, with companies in India growing 42% by value and 51% by number compared to the same period last year, to raise an aggregate of $5.3bn. Also in positive territory, Australian ECM raised $4bn, up 33% year-on-year.
While the total value of IPOs almost halved to just $16bn, the number of IPOs by Asia Pacific companies increased by 8.6% compared to the first quarter of 2022. As a result, the region accounted for 68% of global IPO proceeds during the period. The lion’s share was driven by China, raising $14bn, down 20% in absolute terms, but capturing 58% of worldwide proceeds.
Follow-on equity issuance by Asia-Pacific companies increased 32% year-on-year to raise $37bn, although convertible bonds fell in popularity, dropping to a six-year low of just under $8bn. Companies in the Industrials sector almost doubled their market share, year-on-year, to account for 23% of the market, and combined with High Tech and Materials sector issuers, accounted for more than half of all issuances.
CITIC leads ECM underwriting rankings, with a 13% market share and $8bn in related proceeds.
DCM boom continues… for now
Asia-Pacific’s booming debt capital markets saw a 14% drop off in primary bond issuance from the record first quarter of 2022, to reach the second largest Q1 since records began in 1980. In total, $856bn of bonds were raised by issuers in the region. Investment banking fees dropped slightly faster than the market, down 18% year-on-year to earn $3.1bn.
Of these, China accounted for 77%, with proceeds worth $660bn, down 16% on the year. South Korea and Australia took second and third place, with 8% and 5% market shares, respectively.
Government & Agencies accounted for 45% of the market, raising $387bn, just 2% lower than last year’s record. Indeed, the People’s Republic of China accounted for all six of the largest bond deals so far this year. Elsewhere, Financials took 33% of the market to raise $284bn, down by more than a quarter on the same period last year, and issuers in the Industrials sector accounted for 8%.
CITIC leads the region for bond underwriting, with a 5.5% market share, relating to proceeds of $47bn.
In terms of overall investment banking fees in Asia-Pacific, CITIC took the top position, with 8% of a shrinking regional wallet, to earn $481bn.
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