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Deal Drivers: APAC FY 2023

Indomitable region powers on

APAC remained the world’s growth engine in 2023. The International Monetary Fund expects the region’s GDP to have expanded by 4.6% last year, an increase from 3.9% in 2022.

Economic output rebounded in China, and continued to expand in India and several ASEAN industrial economies.

The recovery of international tourism positively impacted service sector exports in countries such as Thailand, Malaysia, and Singapore. Natural-resource-rich nations such as Australia, Malaysia, and Indonesia have also benefited from global commodity prices trending above recent averages.

The long-term outlook in China is dimming, but it’s all relative. The “world’s factory” has experienced monumental growth and is now transitioning from an export- and investment-led model to a consumption- and services-orientated economy. This is expected to lead to a lower but more sustainable growth rate over the next decade, with the likes of India and Southeast Asia growing faster.

Counting on M&A

M&A dipped last year, mirroring the fortunes of the Americas and EMEA. Even then, it was well above 2021’s levels from a volume perspective. In fact, APAC’s year-on-year deal volume performance comfortably beat the Americas and only slightly lagged behind EMEA.

The closest comparative trend is what happened in EMEA. While volumes have been steady, transaction values have taken a hit, falling below 2020’s levels. Simply put, investors have been exercising caution by risking less capital—a natural consequence of higher financing costs and the prevailing uncertainty that has shaped markets over the past two years.

APAC has some of the least contractionary monetary policies globally. Several Asian central banks have implemented higher interest rates to keep a lid on inflation. However, countries like China, Japan, and Vietnam are taking a more accommodative approach to sustain their economies.

Indeed, unlike much of the rest of the world, China now fears the D-word: deflation. The Consumer Price Index in the country turned red at the end of 2023. Deflation can have disastrous consequences for borrowing. In such an environment, interest rates on loans don’t fall as fast as the inflation rate, making it more expensive for businesses to finance their investments. If this becomes entrenched, it will not be supportive of M&A.

Published in association with Datasite, Deal Drivers APAC provides an in-depth review of M&A activity in 2023, as well as an outlook for the year ahead.

The report is also available on datasite.com.