Asia-Pacific investors expect a rebound in the M&A market, driven by optimism around valuations and an increase in cross-border deals, particularly in the tech sector. Those in China, in particular, foresee valuations catching up with global benchmarks, as well as a trend towards larger transactions amid an anticipated regulatory easing.
APAC stands out as the most bullish region, according to the latest survey from law firm Morrison Foerster, with 45% of respondents expecting to engage in larger M&A deals. In contrast, European and North American markets show a more modest inclination towards moving upmarket, with 32% of respondents in both regions expecting an increase in deal size.
“It’s not surprising that Asia-Pacific buyers are the most bullish on deal valuations,” says Chuan Sun, managing partner of Morrison Foerster’s Shanghai office. “As we emerge from a period of slower deal flow, optimism for the coming year reflects Asia’s enthusiasm for [private equity]-backed companies, China’s economic stimulus, and the significant equities rally in Hong Kong and China. While market uncertainty may still lie ahead, we are poised to see value convergence and more cross-border deals.”
According to the survey, 18% of APAC respondents anticipate pursuing much larger tech deals by 2025. In the first three quarters of 2024, dealmakers announced 63 transactions targeting tech companies in Singapore. Although this total is down by 13% from the 72 deals announced in the same period last year, the aggregate value of those transactions remained stable year-on-year, decreasing only slightly from US$3.1 billion to US$3.0 billion in the first nine months of 2024, says Morrison Foerster.
China is expected to see a rebound in large M&A deals in the tech market. Valuations for China’s key tech stocks have significantly lagged behind their US counterparts, so there is room for growth. As Asia-Pacific tech valuations catch up, cross-border deals may become increasingly attractive, potentially driving international tech M&A activity in the region, according to the survey.
Between 2020 and 2023, Chinese authorities implemented a series of sweeping measures aimed at restraining the unchecked growth of technology giants. However, analysts have noted that this period of tightened regulation has threatened to hinder China’s pursuit of self-sufficiency and global leadership in the technology space, and may now be ending as the country pursues “normalized management” of the industry.
“Dealmakers are evaluating more considerations in this shifting market, with deal structures offering flexibility, shared risk, and performance guarantees,” says Jeremy White, partner and co-chair of Morrison Foerster’s global M&A practice. “However, tech M&A continues to be a priority, as investor interest in larger, domestic acquisitions of high-growth companies is seen as key to unlocking the promise of transformative technologies like generative AI.”
