What do M&A opportunities in Asia-Pacific look like?

Equiteq’s CEO, David Jorgenson, and Jean-Louis Michelet met with Professor Kevyn Yong (Dean of ESSEC Asia-Pacific and specialist of entrepreneurship) at ESSEC Business School in Singapore to discuss the opportunities and challenges impacting M&A activities in the Asia-Pacific region.

This is the second part of their discussion: How do the differences between regional APAC markets impact M&A activities in the B2B services sector?


There are essentially five sub-regions in APAC, each of them with specific characteristics:

  • China, Hong Kong, Taiwan

China is a huge economy, but the services sector is still at a relatively early stage. There aren’t many home-grown companies developed by local entrepreneurs that have reached ‘international investor-grade’. In recent years, however, several large Chinese companies have shown an interest in acquisitions in the region and beyond, with a view to reducing their dependency on their domestic market and gaining international credibility. Hong Kong stands out in this regard, because it’s a vibrant market with established global consultancies.

As an example for China, BlueFocus has managed, through an aggressive acquisition strategy, to boost the topline growth of its digital business, which has accounted for 73% of total group revenue in  2016, doubling the proportion recorded in 2015.

  • North Asia (Japan-Korea)

Japan (and Korea to a lesser extent) are highly mature markets. They can be considered low domestic growth prospects (notably in Japan), and culturally depend on close business ties, making it a difficult market to penetrate for foreigners in search of sell-side opportunities. Most mid-size services firms operate as “family businesses” which typically excludes external advisors, as well as foreign acquirers. However, on the buy-side, large and now even mid-size players are showing more and more appetite for acquisitions in regional markets in Asia to reduce their dependency on their local markets.

These acquirers are becoming “strategic buyers” with a long-term vision of international growth. The acquisition  of Singapore-headquartered Spire Research & Consulting by Japanese firm, Yamada Business Consulting, with Spire (which was advised by Equiteq in this deal) becoming YBC’s flagship of its international expansion, is an excellent example of this trend.

  • South-East Asia (Singapore, Thailand, Malaysia, etc.)

These are the active, cosmopolitan markets that are centered on the Singapore hub, with many so-called “hybrid” companies: These businesses have been created and developed by either foreigners who have worked and lived in Asia for decades, or locals who are familiar with international business standards and practices – making them attractive to foreign acquirers.

The acquisition by French company Activeo (advised by Equiteq) of two Singaporean companies, Kasturi Technology and Jusfeedback, – is a good example of local businesses attracting international investment.

  • Australia-New Zealand

The Australia and New Zealand markets offer numerous opportunities as they are home to high-quality companies in all sectors, including engineering, mining and digital marketing. M&A activities are also boosted by the presence of big buyers as well as an active private equity funds industry, which has created a favorable ecosystem.

The merger of PMsquare (a company active both in Australia and South-East Asia, advised by Equiteq) with Cornerstone Performance Management, is testament to the sort of opportunities emerging in this market.

  • South Asia (India, Pakistan, Sri Lanka, etc.)

These markets are characterized by a large IT services industry dominated by juggernauts (Wipro, Infosys, Tata, HCL, etc.) and offshoring services. However, not many independent, small or mid-size companies have yet emerged with both the required quality and size to attract huge M&A interest. Conversely, we continue to see the big players, particularly in IT, acquiring international businesses (e.g., India based HCL’s acquisition of aerospace and defense engineering services firm, Butler America Aerospace).

The exciting thing about the APAC market is that, while the proportion of high-value domestic deals is much lower than in North America or Europe, most of the high-profile transactions tend to be cross-border and even cross-continental. These cross-border transactions are typically strategic deals with high value, because the foreign acquirers place a premium on strengthening their foothold in the target’s country or region. On the other hand, the challenge to would-be sellers is that, in order to attract the attention of these large foreign buyers, firms have to be sufficiently large and have a strong value proposition and/or strong IP.

Our tip: To be of interest to international buyers, and as such to be able to complete high-value deals, services firms should focus even more than their Western counterparts on articulating a strong value proposition and developing robust IP. Also they should take bold moves to break the “glass ceiling” represented by the $10m mark in annual revenues, including considering small targeted acquisitions.

To watch the full video interviews with Prof. Kevyn Yong, Dean of ESSEC Asia-Pacific; David Jorgenson, CEO at Equiteq; and Jean-Louis Michelet, Managing Director, Equiteq Asia-Pacific visit here.

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One thought on “What do M&A opportunities in Asia-Pacific look like?

  1. Pingback: International firms tap into Asia-Pacific markets with strategic acquisitions of specialist firms | Equiteq Edge

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