Protectionist law hinders M&A growth
Saturday, 30 June 2007
Sundeep Tucker
PROTECTIONIST legislation and management culture are the most serious obstacles to continuing growth in mergers and acquisitions (M&A) activity in the Asia-Pacific region, according to a survey published recently.
More than 80 per cent of senior executives of major companies in the region cited "domestic legislation that stifles foreign ownership" and widely different management cultures across Asia as the issues most likely to derail their cross-border acquisition plans during the next 12 months.
Companies seeking to sign deals in fast-growing markets such as China and India can face a bewildering and changing array of local regulations, which often prove insurmountable.
Carlyle Group, the US private equity fund, has spent more than 18 months trying to secure regulatory approval to buy a significant stake in Xugong, China's construction machinery maker, amid a nationalist backlash against foreign investment.
Further obstacles to M&A cited by executives were the lack of consistency in application of laws and the fact that target businesses are often unwilling to sell.
The inaugural study was based on responses from 200 chief executives and chief financial officers of regional and multi-national companies based in Asia in March and April this year. The report was commissioned by Simmons & Simmons, the law firm, and conducted by Mergermarket, the M&A data provider owned by the Financial Times Group.
Damon Le Maitre-George, head of international corporate practice for Simmons & Simmons, said: "We believe companies who are pursuing M&A opportunities [in Asia] will pay more attention to the legal aspects of the transactions in formulating their strategies."
In spite of the concerns over obstacles, M&A activity has hit record levels in the region as companies rush to engineer acquisitions and alliances to gain exposure to soaring growth rates in countries such as China and India.
According to the study there were 614 M&A deals in the region in the first quarter of the year, nearly double that of the same period last year, with a record combined value of $110.5bn.
Sectors expected to see the most activity in the coming 12 months include manufacturing, financial services, life sciences and technology, with 60 per cent of respondents planning to strike a joint venture or M&A deal in the period.
However, the deal sizes are expected to be between $100m to $500m - moderate compared to the mega-deals that are taking place in the US and Europe.
Nearly two-thirds of those surveyed believe that outbound M&A will also rise in the next 12 months, as Asian-based companies look to build global scale and acquire technologies, with North America and Europe the expected hunting grounds.
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FT Syndication Service
PROTECTIONIST legislation and management culture are the most serious obstacles to continuing growth in mergers and acquisitions (M&A) activity in the Asia-Pacific region, according to a survey published recently.
More than 80 per cent of senior executives of major companies in the region cited "domestic legislation that stifles foreign ownership" and widely different management cultures across Asia as the issues most likely to derail their cross-border acquisition plans during the next 12 months.
Companies seeking to sign deals in fast-growing markets such as China and India can face a bewildering and changing array of local regulations, which often prove insurmountable.
Carlyle Group, the US private equity fund, has spent more than 18 months trying to secure regulatory approval to buy a significant stake in Xugong, China's construction machinery maker, amid a nationalist backlash against foreign investment.
Further obstacles to M&A cited by executives were the lack of consistency in application of laws and the fact that target businesses are often unwilling to sell.
The inaugural study was based on responses from 200 chief executives and chief financial officers of regional and multi-national companies based in Asia in March and April this year. The report was commissioned by Simmons & Simmons, the law firm, and conducted by Mergermarket, the M&A data provider owned by the Financial Times Group.
Damon Le Maitre-George, head of international corporate practice for Simmons & Simmons, said: "We believe companies who are pursuing M&A opportunities [in Asia] will pay more attention to the legal aspects of the transactions in formulating their strategies."
In spite of the concerns over obstacles, M&A activity has hit record levels in the region as companies rush to engineer acquisitions and alliances to gain exposure to soaring growth rates in countries such as China and India.
According to the study there were 614 M&A deals in the region in the first quarter of the year, nearly double that of the same period last year, with a record combined value of $110.5bn.
Sectors expected to see the most activity in the coming 12 months include manufacturing, financial services, life sciences and technology, with 60 per cent of respondents planning to strike a joint venture or M&A deal in the period.
However, the deal sizes are expected to be between $100m to $500m - moderate compared to the mega-deals that are taking place in the US and Europe.
Nearly two-thirds of those surveyed believe that outbound M&A will also rise in the next 12 months, as Asian-based companies look to build global scale and acquire technologies, with North America and Europe the expected hunting grounds.
.......................................
FT Syndication Service