Indian companies are increasingly looking at South East Asian countries for business and mergers and acquisitions (M&As) because there is a good strategic and cultural fit with companies in the region. Indian companies in sectors such as healthcare, consumer and industrials have done M&As with counterparts in countries such as Malaysia, Indonesia and Thailand.
Smart Indian entrepreneurs are increasingly looking at South East Asia for its sizeable collective market, greater ease of doing business, and large unmet demand for information technology expertise.
Moreover, barring Singapore, education in technology and engineering is considerably lacking in South East Asia and that is where Indian entrepreneurs are gradually making a mark in the region.
The M&As deals between Indian and South East Asia countries grew from $8.1 billion in 2016 to $14.9 billion in 2018, according to data from Grant Thornton. Moreover, a survey done by Baker McKenzie on 100 C-Suite Indian business leaders shows that deal making will continue to increase, with 7 in 10 Indian business leaders expecting a significant increase in M&A in their industry. In terms of where Indian business are looking to acquire and invest, domestic targets still top the list, but South East Asia now runs a close second.
Growth drives M&A
In the past, the US was the number one destination for Indian companies looking for M&As and other investment opportunities outside of Asia. Also, the UK is no longer a preferred investment destination, because of looming Brexit fears and slowing economy. However, intra-Asian deal sizes are still usually smaller than those in Western markets.
Rapid economic growth in South East Asia is attracting a lot of global capital and the M&A route is emerging as a popular way to enter the market. In fact, M&As can offer foreign companies’ smoother entry and local companies can help disentangle the complexities. The region has a population of around 650 million and a combined GDP of $2.7 trillion. The region is also inter-connected and consists of a rising young population which drives consumption growth. A Bain research shows that South East Asia’s investment ecosystem is entering a new phase of growth and by 2024, the region will give rise to at least 10 new companies with a market value of more than $1 billion each.
Rise in global M&A in South East Asia
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