Mergers and acquisitions (M&A) surged 42 percent last year with the total transaction value spiking 75 percent, as firms expanded to new overseas markets to cope with global protectionism, PricewaterhouseCoopers (PwC) Taiwan said yesterday.
The number of M&A deals rose from 81 to 115, while transactions increased from US$6.15 billion to US$10.74 billion, PwC Taiwan’s annual M&A report showed.
The trade dispute between the US and China drove Taiwanese firms to diversify production lines beyond China to avoid tariffs imposed by Washington on Chinese goods, Lily Wong (翁麗俐), managing director of deals services at PwC Taiwan, told a forum in Taipei.
“Risk diversification provided the catalyst for M&A activity last year and may continue to do so this year and beyond,” Wong said.
The strategy drove Hon Hai Precision Industry Co’s (鴻海精密) subsidiary Foxconn Interconnect Technology Ltd (鴻騰科技) to acquire a 100 percent stake in Belkin International Inc, a US manufacturer of consumer electronics that specializes in connectivity devices.
Similarly, Yageo Corp (國巨), the world’s biggest supplier of chip resistors, bought US-based Pulse Electronics Corp to expand its product mix and gain access to overseas markets.
Foreign private equity funds lent support to 34 M&A deals, the report showed.
KKR & Co took over Kaohsiung-based LCY Chemical Corp (李長榮化工) to help the local firm transform after a series of gas explosions in the city in 2014, it said.
The development of 5G technology would fuel and dominate M&A activity this year, Wong said.
Meanwhile, the US-China trade dispute is to shake up the global supply chain, Wong said.
Many Taiwanese companies depend on manufacturing facilities in China to fill orders from global technology brands, but the practice might not be sustainable if the US and China keep trading punitive tariffs, she said.
Some Taiwanese companies have moved their production lines back to Taiwan or Southeast Asia, the report said, adding that while it is wise for firms to expand their export markets, they should also seek to adjust and upgrade their product mixes, so that they are not reliant on just a few products.
A considerable number of Taiwanese firms are controlled by families, who should draw up succession plans as top executives age, the report said.
Taiwanese firms are less prepared in this regard, compared with their regional and global peers, it added.
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