Asian Mergers and Acquisitions: Riding the Wave

CHAPTER TWO

Asian Companies Are Poised to Triumph in the Merger Endgame

One of the primary themes of Western mergers and acquisitions (M&A) is the inexorable drive toward consolidation. Indeed merger endgame theories seem to suggest a single optimum of a handful of companies dominating an industry. In Asia, there will be room for multiple “local optima” since significant fragmentation exists between markets and customers. This requires companies to make a decision about which markets and customers they wish to serve and how to drive consolidation at that level. Early analysis shows different industries will have varied outcomes.

We believe that a number of Asian industries will undergo a wave of consolidation over the next few years. We also believe that Asian companies and brands will emerge as national and as regional champions in this formative merger endgame.

Consolidation follows a predictable path as industries develop and mature. In Western markets like the United States and Europe, a handful of companies tend to dominate an industry as it reaches maturity, first nationally, then regionally within its continent, and then across the Western world, and finally, globally. In Asia, consolidation will play out differently. Asia’s markets are fragmented in many critical ways: regionally, culturally, linguistically and, most importantly, economically. The disparity makes it tough for companies such as Vodafone, a telecommunications company that has a 20 to 40 percent market share ...