European spending spree skirts Hong Kong and Southeast Asia
A leading survey shows US and European investors spent more acquiring Asian companies last year than in the previous two years combined - but their spending spree largely bypassed Hong Kong and Southeast Asia.
Japan and Australia accounted for the lion's share of a 67.72 per cent increase in deals last year from the year before, according to financial publication M&A Asia.
Investors spent US$68.6 billion last year compared with $40.9 billion in 1997, according to the survey. US companies nearly trebled their M&A investments to $17.82 billion from $5.85 billion, while European outlays jumped nearly six times, from $2.24 billion to $13.46 billion.
But investors shunned deals in countries like Indonesia and Thailand, where massive privatisation programmes resulted in few actual sales. The falls were attributed to a weakening of currencies in Southeast Asia as well as difficulties in coming to terms on price.
An unwillingness by banks to accept writedowns on their loans also stalled deals, analysts said.
'There is still a substantial expectation gap between buyers and sellers,' said a partner at consultancy Deacons Graham & James, quoted in the survey.
Within Asia, Hong Kong was replaced by Australia as the most active corporate buyer. Hong Kong dropped to fourth place from first in 1997, after Japan and the mainland.
It was China Telecom's $2.9 billion acquisition of Jiangsu Mobile - the third biggest Asian deal of the year - that put the mainland on the map.
Deregulation in Japan attracted some of the year's biggest deals.
The United States powerhouse GE Capital's acquisition of Japanese finance company Lake Co was worth $5 billion while the Travelers Group-Nikko Securities tie-up was worth $1.6 billion.
South Korea was host to some of the most active intra-country consolidation as its Government urged chaebol to streamline.
Daewoo Corp spent $1.6 billion to acquire Ssangyong Motor in the largest such deal.
However, some analysts point out that many of the deals initiated in Korea - including between Hyundai Motor and Kia Motor and LG Semicon and Hyundai Electronics - could potentially unwind.
'The policy has been: swap now, pay later,' according to an analyst at Worldsec International in Korea.
Labour opposition and disagreements over which product lines should be faded out or supported are complicating merger plans, he said.