bodyType

customContents

entityId

entityUuid

articlePageQuery

filter

article

articleBaseAdvertisingInfoArticle

articleListArticle

articleSeoArticle

hooksArticleAcknowledgementGateOverlayArticle

hooksTrackPageViewArticle

hooksContentInterestArticle

articleLinkingDataContent

hooksAmpRedirectArticle

articleSchemaContent

liveArticle

advertZone

sentiment

contentLock

topics

types

sections

paywallTypes

createdDate

publishedDate

sponsorType

urlAlias

moreOnThisArticles

commentCount

authorLocations

authors

corrections

displaySlideShow

multimediaEmbed

printHeadline

seriesContainer

articleSpeeches

socialHeadline

headline

images

flag

firstTopic

glossary

flattenTypeIds

image

relatedLinks

relatedNewsletters

__typename

sponsor

pdfFiles

seriesReverseOrder

series

disableOffPlatformContent

published

updatedDate

summary

subHeadline

body

keywords

readingTime

customTimezone

liveContents

The pursuit of growth by Asian companies has now become the pursuit of survival, according to financial consulting group Andersen.

Under pressure from governments to restructure, demanding customers, globalisation and rapid technology advances, Asian companies would increasingly look to mergers and alliances rather than organic growth to survive, said Mark Powell, Andersen partner in Singapore.

With Hong Kong partner Stephen Cheung, Mr Powell was presenting the findings of a global survey by Andersen of 300 financial institutions.

About 39 per cent of respondents reported they had formed strategic alliances over the past two years, while 37 per cent had acquired another company and 21 per cent had been involved in mergers.

Based on the survey responses, Andersen concluded that the days of Asian institutions leading a sheltered life in a protected domestic market were at an end.

The survey results showed they were now eager to participate in the globalisation trend, even more so than North American and European players, who preferred regional combinations.

'Within Asia, the Australians and Singaporeans are by far the most interested in global partnerships, while the Japanese lag behind significantly in this area,' the report noted.

The biggest prize on offer in an acquisition, according to 70 per cent of respondents, was the customer and product-related assets they could bring.

Clear differences emerged between US and Asian managers, Mr Powell said.

'While shareholder value is the ultimate goal of a merger or acquisition, organic growth is seen as the preferred method in North America, while acquisition is preferred in Asia,' he said.

Asian mergers and acquisitions were also defensive rather than opportunistic, and securing a 'cultural fit' between the companies involved was also more important to Asian managers, Mr Powell said.

The DBS acquisition of Dao Heng Bank in Hong Kong was driven by the Singapore bank's desire to gain access to the China market, said Mr Cheung, while in the case of the Standard Chartered and Chase Manhattan merger, the latter's credit cards were the main attraction.

Looking ahead, the Andersen report forecast that mega-mergers between mainland banks, or Chinese, United States and European giants were unlikely.

'The standards of the banks are too different in mindset and technology,' said the report.

'However, there will be combinations of a sort. Bank of China and Citibank now exchange management information.

'They may not look to merge, but rather create an alliance whereby [Bank of China] offers inexpensive labour and processing, while Citibank brings in international capabilities and new products.

'Alliances are the way of the future for the mainland market,' the report said.

In the case of mergers and acquisitions, failure rates were high, warned Mr Powell.

'About 60 to 70 per cent of all mergers and acquisitions fail and one third of all acquired firms are sold off within five years,' he said.

One of the chief reasons for this failure rate, he said, was that whereas human capital was the most important issue needing to be addressed by management, it was consistently overlooked - with more than 30 per cent of managers saying the most important target of an acquisition was customers and products.

'Management's focus on [customers and products], must, in our view, be balanced with an appreciation of a wider range of assets - both intangible and tangible, financial and non-financial,' said the report.

'These assets must be assessed and nurtured to ensure that management can truly realise value from the primary driver of combination.'

Graphic: ande26gbz



Survival needs give mergers higher priority