Financial Advisory Fees for Asian M&A Hit 11-Year Low in H1 2024
Financial advisory fees from mergers and acquisitions (M&A) in Asia fell to their lowest level in 11 years during the first half of 2024, with no quick recovery in sight due to declines in both announced and completed deals.
According to LSEG data, M&A fees in Asia amounted to $1.5 billion in the first six months, the lowest since 2013, with Japan alone accounting for 40% of that total.
This fee decline adds pressure on investment banks, which have already cut hundreds of jobs in Asia over the past two years to cope with sluggish capital markets and falling revenues.
The total value of announced transactions in Asia fell 25% year-on-year to $317.5 billion, marking another 11-year low, suggesting that transaction revenue may remain tight. Completed deals, totaling $253 billion, were the lowest since 2009, a time when the global financial crisis severely disrupted market activities.
Tom Barsha, head of Asia Pacific M&A at Bank of America, noted, “A reduction in average deal size is driving much of the decrease in M&A deal volume year to date, as investors prioritize mid-sized opportunities over large transformative M&A.”
In a notable example, Australia-based miner BHP Group (NYSE) abandoned its $49 billion takeover plan for rival Anglo American (JO) last month after a six-week pursuit, eliminating what could have been one of the biggest paydays for bankers globally this year.
Japan, the only Asian market that saw M&A growth in 2023, experienced a 23% decline in announced deals in the first half of 2024, totaling $61 billion amid a weakening yen.
China saw a continued dampening of investment appetite due to a slowing economy and rising geopolitical tensions, with total deals down 25% in the first half to $108 billion, the lowest since the same period in 2012.
In contrast, M&A activity globally increased by 16%, with deals totaling $1.5 trillion.
Some bankers in Asia are hopeful that private equity, take-privates, and digital infrastructure investments will drive deals, and more sales processes may be launched toward the end of this year.
Rohit Satsangi, Deutsche Bank’s co-head of M&A for Asia Pacific, said, “We are seeing more reasonable valuations supported by better financial markets and a wider group of buyers.” He also noted that China’s outbound activities have restarted, with both private and state-owned companies looking for assets, particularly in Europe.
“A critical element of dealmaking which remains subdued is investor confidence, and it is intrinsically linked to capital markets activity and valuations,” said Bank of America’s Barsha.
He added that increased capital markets activity in the second quarter has led to more early-stage M&A discussions, pointing to an improved outlook for deals.
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