With the notable exception of China, Asia Pacific's consumer & retail deal volume and values have yet to reach pre-pandemic levels. Technology is a driving force for M&A, with buyers seeking e-commerce and new business models. Outbound M&A activity should grow in 2022, as investors shift from Europe to South East Asia, Africa and South America.
Australia: caution in a volatile market
A slowdown in domestic activity saw deal volume decrease by 12 percent in 2021. Although business picked up in the second half of the year, overall progress was hampered by strict lockdowns.
US PE players are circling consumer products and retail targets, with deals rising sharply by 120 percent year-on-year. The traditionally strong domestic M&A market has been driven by the e-commerce and health & beauty sectors, a trend set to continue in 2022.
The consumer and retail sector has been a key driver of the heightened levels of M&A activity in 2021, underpinned by strong demand from strategic and PE investors for emerging and high growth brands and businesses. We expect M&A in this sector to continue to be strong in 2022, underpinned by strong market fundamentals and led by continued private equity focus.
China: justified optimism is exciting investors
n a boom year, M&A exceeded both 2019 and 2020, thanks to heavy private equity (PE) activity in food & beverage, consumer products and services. Chinese investors are set for a busy 2022, with an accelerated PE play in the `new' economy.
The economic rebound has largely been driven by strong external demand, but growing domestic consumption should boost consumer deals. Inbound investments from financial buyers leapt by 146 percent in 2021 - a trend expected to continue in 2022. Foreign direct investment (FDI) also rose significantly in 2021 and is predicted to stay high, especially from Europe.
Recent declines in outbound M&A activity should reverse in 2022, with Asia Pacific investors looking to strategically important markets such as South East Asia, Africa and South America - a shift from current targets in the UK and Europe.
Despite all the macro economic challenges across the globe, corporates remain bullish about investments in China, and we expect a strong deal pipeline in 2022.
India: the tech revolution creates interesting options
Indian consumer & retail M&A had a stable year, with deal volume down 12 percent on 2020, although value increased by 36 percent.
With COVID-19 shifting consumers' buying habits, expect a spike in investor activity for e-commerce targets, as players rationalize portfolios and explore new channels - including online companies expanding into bricks and mortar. Mature startups are keen to scale and are turning to PE and the capital markets for investment.
Financial investors, including PE, were particularly active in 2021, responsible for almost two-thirds of transactions, and should continue to be the major force behind consumer M&A in 2022.
M&A is expected to be strong in India, driven primarily by the flurry of financial investors looking to participate in the growth story of many small-to-mid-size firms with innovative products and channels.
Japan: compelling prospects as the dust settles
Japan's economy proved remarkably resilient to the pandemic, and consumer & retail companies have used this period to strengthen through consolidations and carve-outs. This wasn't enough to prevent an overall decline in M&A, with volume falling by 14 percent and value by 48 percent. Interestingly, just 38 percent of deals involved financial buyers against a global sector average of 50 percent.
Investments by Japanese buyers in South East Asia rose by a fifth in 2021, notably in Singapore and Vietnam. Inbound investment also enjoyed a bumper year, up 50 percent, driven primarily by US acquirers. Expect further increases in 2022, as investors around the world seek to take advantage of carve-out opportunities.
Japan's domestic market is strong, with deals expected from PE and, interestingly, in the ingredients sector where large players are looking to expand.
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