Asian Mergers and Acquisitions: Riding the Wave

CHAPTER ONE

Asia Rewrites the M&A Rules

Consolidation follows a fairly predictable pattern in developed economies in the West: Big fish eat little fish in the domestic market, and a small handful gains dominance of the pond. These dominant players start looking for targets abroad after they’ve built might and muscle at home. Domestic consolidation precedes global mergers and acquisitions (M&A).

Nobody, however, told that to India’s Tata Tea.

In February 2000, Tata bought Tetley Tea, a 160-year-old British company and one of the world’s best-known tea brands, for $431 million. Tata Tea, a relatively young company, was one of many players in India’s large, diverse tea sector that had yet to go through consolidation. That didn’t stop Tata from heading overseas or homing in on much bigger prey. Tetley Tea was three times the size of Tata.

Asian companies are rewriting the rules on M&A. Small Asian players are buying large Western brands. Asian companies that compete in crowded, fragmented domestic markets are snapping up competitors over the border instead of in their own backyard. Waves of consolidation are sweeping through Asia, but it won’t play out in a textbook fashion. The reasons Asian companies undertake M&A are different, the way they approach M&A is different, and the way Asia’s consolidation story will play out will be different, too.

DEAL ACTIVITY IS ON THE RISE IN AN ASCENDANT ASIA

The plot of this particular story is starting to thicken. Asian companies emerged from the ...