HK needs to 'sharpen up' to win M&A race in region

Updated: 2015-11-26 07:47

By Emma Dai in Hong Kong(HK Edition)

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Consultant tells SAR to fine-tune investor facilities, with M&A deals within APAC tipped to hit $600b

An increasing number of smaller deals targeting value creation over the long term has emerged as the trend in mergers and acquisitions (M&As) this year amid digital disruption across sectors, according to global consulting firm Accenture Strategy.

While Hong Kong and the mainland remain as M&A drivers in the Asia Pacific (APAC), the SAR needs to sharpen its offerings to win the regional competition as the primary hub to seal those deals, the consultant said.

"In this era of digital disruption, the game has gone beyond fintech (financial technology) and applicable to a wide range of industries," said Bruce Delteil, Accenture Strategy's managing director of growth strategy and M&A, ASEAN (the Association of Southeast Asian Nations).

He said consumer-based industries, such as banking and retailing, are adapting faster than others.

David Mann, the company's managing director for Australia and New Zealand, said that while multi-billion-dollar M&A deals continue, conglomerates worldwide have begun targeting startups in order to acquire "pieces of capabilities" that are missing in their portfolio, so as to secure growth in the longer term.

According to Accenture Strategy, the anticipated value of M&A deals this year is up to $4 trillion globally. At least $600 billion worth of deals are attributed to the Asia Pacific region, with the mainland and Hong Kong accounting for three-fourths of them.

The value of M&A deals is expected to grow by at least 10 percent annually on the mainland and in Hong Kong in the next couple years.

However, the trend has posed new challenges for managers, said Mann.

"The startups usually don't have huge cash flows, or long profit track records. The traditional screening and valuation criteria don't work on them alone. It needs strategic planning to see where it fits in a bigger business," he said.

For the region, the question remains as to what is the best place for startups to meet investors, said Delteil.

"To make Hong Kong the primary place to facilitate M&A deals, the city needs more incubators, such as the FinTech Innovation Lab," he added.

Launched by Accenture and 10 financial institutions in June 2014 in Hong Kong, FinTech Innovation Lab Asia-Pacific is a competition program which helps early-stage financial technology innovators accelerate product development and gain exposure to the banking industry.

(HK Edition 11/26/2015 page9)