FINANCIAL INSIGHT It was a dogfight for some banks to even remain in the top 10. Citi only brought in $305m in 2013, compared to $343m in 2013, causing it to drop from 5th spot to 8th. Deutsche Bank and HSBC both fell one spot from the 2012 rankings with revenues of $334m and $314m in 2013. Two investment banks clawed their way into the top ten. Jumping two spots and three spots to rank 9 and 10 was Bank of America Merrill Lynch and Standard Chartered Bank, respectively, with $217m and $219m in revenue. Equally upping their game last year was Morgan Stanley, springing three spots up to 6th with $331m in revenue. Leaping to the top 4 from 7th was Goldman Sachs with $363m in revenue. Pogson is not surprised that Standard Chartered worked its way up the rankings, being more geographically diverse and less China-focused. “It is the only house beefing up in the region,” he adds. Deloitte’s Ho notes that all these changes can be attributed to 2013 being a subdued year for deals such as M&A’s. Also, there were too many banks competing for fewer deals, pushing fees lower. He adds that banks aggressively expanded their Asia operations after the global financial crisis and hired for an expected increase in stock and bond underwriting and advice on M&A, which didn’t happen. “Based on public data available to Dealogic, certain banks look particularly reliant on ECM. In terms of revenue mix, some banks were less exposed to the equity business last year than some other firms,” adds Ho. M&A deals If there was a bright spot for the hard working bankers in Singapore and Hong Kong it was in Mergers & Acquisitions, which saw transaction volumes up 17% to $546.5b. Despite the political instability, Thailand was the most targeted nation in South East Asia for the first time with a record $18.2bn via 191 deals
in 2013, more than double the $7.2bn announced in 2012. The $6.6bn acquisition of Siam Makro by CP All was the largest Thai targeted deal in 2013. Another key deal in this market was The Bank of Tokyo Mitsubishi UFJ’s US$5.31bn acquisition of a 72% stake in Thailand’s Bank of Ayudhya which made it the largest acquisition in Asia by a Japanese bank to date. Tim Bednall, Managing Partner for Corporate M&A and Tax Australia at King & Wood Mallesons, a firm which ranked third for M&A deals in 2013 according to Thomson Reuters, says, “We saw a very strong flow of M&A transactions across the region in the last 6 months of 2013, especially in China where the firm achieved the #1 position in the M&A league tables. We expect that level of deal flow to continue for the first half of 2014.” M&A vs joint ventures According to Elaine Tan, Senior Analyst for Deals Intelligence at Thomson Reuters, corporate decision-makers are expecting a 17% increase in worldwide M&A during 2014, bolstered by increased confidence in the financial and real estate, media and telecom, and healthcare sectors. She adds that, according to the survey, 63% of respondents in Asia are looking to penetrate new markets in 2014. “Asia Pacific respondents also demonstrated a marked preference for exploring M&A as opposed to organic expansion or joint ventures,” Tan says. Manish Nigam, a research analyst with Credit Suisse, says one of the key reasons for this expected acceleration in M&A and corporate net buying is that the corporate sector has US$2.3tn of ‘firepower’ to return leverage to average levels in Europe and the US, and private equity has nearly US$1.1tn available to spend. Nigam notes that given the fragmented nature of competition in various markets in Asia and the challenging business environment,
Elaine Tan
Ho Kok Yong
Manish Nigam
Tim Bednall
Benson Wong
one common area for M&A is that of larger companies buying out smaller companies. “At the sector level, banks and insurance are likely to remain an active area of consolidation and we expect the larger Internet companies to further expand their presence through acquisitions,” he adds. EY’s Pogson concurs and believes 2014 will be a good year for M&A. He adds that China will be a better source of revenue given the re-opening of the capital markets. ECM market The ECM market also paints a better picture with volume in Asia Pacific up 4% to $194.1bn via 2,037 deals in 2013. IPO volume was also up 20% to $47.2bn. PwC reports that the Hong Kong IPO market is poised to continue being in the top three of listing hubs for this year. Dealogic reported that 94% of IPO volume from Chinese issuers in 2013 listed in Hong Kong, the highest proportion on record. HK Electric Investments’ $3.1bn IPO leads the top global IPOs for 2014 YTD, the world’s largest IPO since Royal Mail’s $3.2bn listing in October 2013. But even that deal disappointed bankers, raising much less than the $6bn that had been bandied about, and was priced at the bottom end of the range. “The Hong Kong IPO market livened up in the second half of 2013, and especially in the fourth quarter. Market uncertainties were being eliminated gradually and this favoured IPO pricing. There were also adequate funds in the market,” says Benson Wong, PwC Hong Kong Assurance Partner.
Asia-Pacific IB Revenue - Full Year $bn
%
Source: Dealogic
HONG KONG BUSINESS | MARCH 2014 17