The slowing global economy might facilitate mergers and acquisitions (M&A) in Taiwan next year as ailing firms look to exit markets and foreign funds seek partners to tap into the Chinese market, analysts said yesterday.
Janet Tseng (曾馨慧), vice president of the investment banking department at Yuanta Securities Corp (元大證券), said the weakening economy would drive domestic LED, solar energy, flat-panel and IC makers to speed up integration, while some might be forced to abandon the market altogether.
“The chance of [industrial] realignment is on the rise, particularly for domestic technology companies,” Tseng told a forum organized by Taiwan Mergers & Acquisitions and Private Equity Council (台灣併購與私募協會).
Tseng said her company is giving top priority to the issue and expects to see positive results.
The green energy industry is braced for a brutal correction until there are the right number of suppliers left, Motech Industries Inc (茂迪), the nation’s biggest solar cell maker, said recently.
Half of next year’s estimated global demand is already in place, Motech, in which Taiwan Semiconductor Manufacturing Co (台積電) owns a 20 percent stake, said in October to underscore the seriousness of the oversupply place.
Huang Chi-yuan (黃齊元), president of the M&A council, said the recent chairmanship reshuffle at Chimei Innolux Corp (奇美電子), the nation’s biggest LCD panel maker, might ease the way for the sector’s integration, though it remains a long-shot.
Council for Economic Planning and Development Minister Christina Liu (劉憶如) recently sought to mediate the integration of Chimei and AU Optronics Corp (友達光電) in an effort to help the two firms compete with South Korean and Chinese rivals.
However, Huang voiced concerns about declining interest by foreign capital to invest in local technology firms, which Huang said was partly because of the unpredictable implementation of regulations.
Huang said the government had failed to make clear why in June it rejected US private equity fund Orion Investment Co’s (遨睿投資) buyout of Yageo Corp (國巨), Taiwan’s biggest maker of passive components used in electronics.
“The M&A rules here are not particularly strict, but they are not consistently implemented,” Huang said. “That confuses potential foreign buyers and has led to a sharp decline in investments by US and European private equity funds in recent years.”
However, Japanese capital has displayed a keen interest in strategic partnerships with local firms to take advantage of the Economic Cooperation Framework Agreement (ECFA) signed by Taiwan and China, said James Chen (陳民強) of Lee and Li Attorneys-at-law (理律法律事務所).
Japanese funds are seeking Taiwanese partners in food, retail and other non-technology sectors that have access to the Chinese market, Chen said, adding that the strong yen is making joint ventures more attractive and cost-efficient.
“We are upbeat about successful transactions next year,” he said.
Japanese firms accounted for 47 percent of foreign investment in Taiwan last year, government data showed.