Businesses’ pursuit of digital transformation drove dealmaking activity in the APAC region, and experts predict this will continue in 2023.
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During the first quarter, the technology, media and telecom sector contributed two of the biggest deals in the region and was the busiest in terms of deal volume, with 622 transactions.
“Tech acquisitions have been a consistent force driving mergers and acquisitions (M&A). Last year, we saw a lot of deals revolving around artificial intelligence and the future of work,” said Sapana Maheria, director for Thematic Research at GlobalData Plc.
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“Automation and cybersecurity were very strong themes in the last few years. Cloud is also a very strong theme,” Sapana added.
Generative AI applications like ChatGPT are currently making waves today.
“I think innovation and tech are the two things that are going to be very strong drivers for M&As in 2023. What we expect is that as cost-cutting is going to be one of the main focus areas for businesses, we will see a lot of focus on automation, with innovations, (and) more collaborative tools really picking up, hence, driving the M&A deal trends as well.”
A lot of companies are expected to focus on AI, big data, cloud, cybersecurity, and 5G connectivity.
Digitalization also plays a big role in M&A deals in APAC and globally.
“As 2030 approaches… decarbonisation is going to be one of the primary themes driving the M&A activity,” Sapana shared.
Additionally, the automotive sector is expected to grow due to electric and autonomous vehicles.
Decarbonisation is more prominent in capital deals, with companies investing in products and businesses that enable them to connect emission data.
“Gen Z, which will soon be the majority of the workforce, is very aware and conscious about the carbon footprint that a company has, so companies need to be very actively investing in reducing it,” she shared.
The power sector is also expected to improve.
“Energy transition is one of the major themes in the sector. Hydrogen and renewable energy are massive themes as well and are getting a lot of investment,” she said.
“We expect [the power sector] to remain either consistent or grow in its M&A activities in 2023.”
Another thing that will drive transactions in 2023 is the resurgence of China’s economy.
“China’s reopening in Q4 2022 has led to a significant recovery in consumer consumption as seen by its recent strong performance in the domestic tourism sector during the ‘golden week’ in early May as well as a strong recovery in luxury goods spending,” said Sumit Punwani, partner for Corporate Finance, Deal Advisory at KPMG Singapore.
“Despite the meaningful rebound in the services economy, China’s manufacturing PMI declined from 51.9 (March) to 48.8 (May) and there was a subsequent decline across bellwether commodities such as crude oil, Newcastle coal and copper,” Punwani added.
Punwani also mentioned that given the risky environment, companies must “adopt a long-term lens in assessing deal opportunities.”
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