Corporate deals in Taiwan looks set to remain robust this year thanks to the nation’s sound economic fundamentals, and China’s relatively buoyant economic landscape and business climate, Baker McKenzie and Oxford Economics said in their Global Transactions Forecast published last week.
The report, based on macroeconomic indicators compiled by Oxford Economics and insights provided by Baker McKenzie’s partners in 42 markets, explores the attractiveness of different countries’ economic environments for merger and acquisition (M&A) and initial public offering (IPO) activity.
“In terms of attractiveness for conducting transactions, Taiwan ranks third among all economies in the Asia-Pacific region and fifth globally,” Baker McKenzie said in a statement on Thursday.
The global law firm forecast that the total value of M&A transactions in Taiwan would reach US$9 billion this year on an estimated 122 deals.
That would be less than US$12.5 billion last year, when the numbers were partially inflated by two megadeals by ASE Group (日月光集團), which were together worth US$9.4 billion, Baker McKenzie said.
Last year, Advanced Semiconductor Engineering Inc (日月光半導體), the world’s largest chip packager and tester, completed the acquisition of domestic rival Siliconware Precision Industries Co (矽品精密) to form ASE Technology Holding Co (日月光投資控股), while ASE Group’s subsidiary Universal Global Electronics Co Ltd (環海電子) acquired a 60 percent stake in a Poland-based original equipment manufacturing unit of Chung Hong Electronics (Suzhou) Co (蘇州昶虹電子).
Meanwhile, initial listings would remain a key driver of domestic capital-raising activities, with the total value of offerings estimated to reach US$400 million this year, US$550 million next year and up to US$700 million in 2021, Baker McKenzie said.
“Although global momentum for M&A and IPO activity is likely to encounter a natural cyclical cooldown, key indicators put the Taiwan economy on a stable footing,” Michael Wong (汪士邁), cohead of the corporate and M&A practice at Baker McKenzie’s Taipei office, said in the statement.
“The domestic technology sector, in particular, will continue to remain active, with a number of significant deals in the pipeline scheduled to close in 2019,” Wong said, citing Hon Hai Precision Industry Co’s (鴻海精密) announcement last year of an US$866 million acquisition of Belkin International Inc, a Califonia-based major maker of mobile devices and computer accessories.
As business has become more immune over time to global macroeconomic uncertainty and learned to live with volatility, corporate dealmaking in Japan, Australia, Vietnam and India is expected to remain resilient this year, Baker McKenzie said.
In China, consolidation in heavy industry and upgrades of manufacturing capabilities would be key structural drivers of M&A this year and beyond, it said.
However, “with growth shifting towards a new normal of around 6 percent and the [Chinese] government seeking to further reduce financial risk via slower credit growth, M&A values in China are forecast to remain noticeably lower than through 2015-2016,” Baker McKenzie said.
The law firm forecast that consumer sector-related corporate deals would see strong momentum this year due to accelerating wage growth in advanced economies, while the technology and telecoms sectors would observe several major transactions announced last year to close this year.
Deals in the pharmaceutical and healthcare sectors are predicted to show a modest acceleration after a disappointing showing last year, and consolidation in the finance sector would keep momentum relatively stable, while the basic materials sector should be more active than last year due to demand for new metals and minerals, such as those used in electric vehicles, it said.
“Even with a cooling global economy and rising protectionism, we remain confident that the environment and appetite for dealmaking remain strong among corporates, wherever they are in the world,” Baker McKenzie global transactions leader Ai Ai Wong (黃愛愛) said.
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