M&A QUARTERLY UPDATE APAC FINANCIAL SERVICES - Q3 2019 - PWC CHINA
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M&A Quarterly Update APAC Financial Services Q3 2019
Executive summary
There were 105 APAC FS related M&A deals in Q3 2019. Whilst Despite global macro uncertainty impacting deal volumes in Q3
this represents a 5% decrease on the previous quarter1 and 35% 2019, capital continues to flow in and out of APAC with 45 cross
against prior year2, spending per deal has increased. border deals3. Significant deals include the $3.0bn acquisition of
Thailand’s SCB Life by Hong Kong insurer FWD as well as the $3.0bn
Whilst the numbers of deals decreased the amount of spending
investment from Tokyo Leasing of Japan in Aviation Capital of the USA.
reached $20.2bn, an increase of 28% on the previous quarter1. This is
attributed to a strong quarter in Thailand where, amongst other deals, We see a number of encouraging opportunities that continue to open the
TMB acquired the 6th largest bank, ThanachartBank for $5.2bn. door to cross border APAC FS deals –for example, the further easing of
foreign investor restrictions in China.
01 02
03 04
Domestic FS M&A represented the backbone of deals with 61 in Fintech has firmly established itself as a key sector and attractive
Q3 2019, a decrease of 5% from Q2 2019. China was at the heart M&A target with 23 deals in Q3 2019. This was the second largest
of domestic M&A –an example being Shanghai listed Harbin High- sector within FS for the quarter –ahead of insurance (19 deals)
Tech’s $1.5bn acquisition of the trading platform Xiangcai Securities. and asset management (18 deals).
Ongoing reforms are anticipated which are likely to lead to further Australia’s CBA made the largest Fintech investment in the quarter
domestic deals. In Japan we expect the recent merger of Fukuoka and with a $460m deal for a share of Sweden’s Klarna Bank whilst a
Eighteenth Bank to be the start of regional bank consolidation and see consortium including China’s Tencent and DST Global was not far
similar trends in Australia, China, Philippines and Indonesia. behind with a $400m investment in Brazilian challenger bank, Nubank.
Notes: 1) Q2 2019; 2) Q3 2018; 3) Cross border deals defined as APAC inbound, APAC outbound and intra APAC
M&A Quarterly Update October 2019
PwC 2APAC FS M&A Trends
105 FS M&A deals in Q3 with $20.2bn of spending.. China drives deal count with large deals in Thailand…
4 5
Deal count v total size Deal count and total size by country
QoQ, $’million and # of Q3-19, $'million and # of
$24,193m 38 21 20 8 6 4 3 2 2 1 1
$20,523m $20,315m $20,219m
$15,832m
$8,278m
$4,529m $4,402m
163
147
114 111 105
$947m $954m $879m
$128m $7m $46m $39m $10m
6
Q3 Q4 Q1 Q2 Q3 CHN AUS JPN KOR SGP THA Others VNM PPN MLY IDN
FY18 FY18 FY19 FY19 FY19
Fintech deal making ranks second amongst FS sectors… Smaller deals formed the backbone of deal making in APAC…
Deal count by sub-sector Deal count by size of deal
QoQ, # of QoQ, # of
163 163
147 147
Fintech
7 Undisclosed
Other 114 111 114 111
105 $500m+ 105
Insurance
$100m-$500m
Asset m’mentM&A trends
APAC continues to see cross-border deal flow… Strategic investment has increased to typical levels…
8
Deal count by capital flow Distribution of strategic/ financial investment
QoQ, # of QoQ, % of
167
150
Inbound9 Financial 29% 28%
32% 31%
Outbound9 114 116 42%
106
Intra-APAC
Strategic 68% 71% 72% 69%
Domestic 58%
Q3 Q4 Q1 Q2 Q3 Q3 Q4 Q1 Q2 Q3
FY18 FY18 FY19 FY19 FY19 FY18 FY18 FY19 FY19 FY19
Notes: 8) Deal counts may vary from deal counts in data on page 3. Deals are classified by the target location however a small number of deals contain multiple bidders with capital flowing from both domestic, intra-APAC and/or APAC inbound
markets. Hence, one deal may be classified up to 3 times for the purpose of this chart; 9) Inbound to and outbound from APAC countries
M&A Quarterly Update October 2019
PwC 4APAC M&A trends
# of deals Size of deals
QoQ change QoQ change Key trends
(2)
21 $(102)m
$947m • AMP plans to merge its banking and wealth divisions to cut costs while targeting the HNW investor segment. At the
-67%
-16% -99%
-34% same time AMP was expected to begin a sales process for its New Zealand business in October 2019, however the
process is thought to have been delayed until January 2020.
Australia
Deal outlook • Australia has become a more attractive destination for fintech companies seeking an IPO with smaller ticket sizes,
especially those from the U.S. A recent listing is the Irish fintech company Fineos raising $143m from its IPO with a
L H market capitalization of around $476m in August 2019.
• Westpac is rumored to be considering the sale of its life insurance business. It would be the last of the big 4
Australian banks to sell down its life business, and is likely to attract foreign and domestic interest.
0 $264m • The consolidation in the pension / superannuation sector continues. Hostplus, a superannuation fund managing
0% +N/A% $28.5b assets, and Club Super managing $408m in retirement savings have agreed to merge into a single $29b
super fund by November 2019.
38 $4,529m • China’s State Administration of Foreign Exchange (SAFE) has announced that it would remove the investment
-17% -21% quota limitations on two inbound investment schemes, namely the Qualified Foreign Institutional Investor (QFII)
program and the Renminbi Qualified Foreign Institutional Investor (RQFII) program, as an effort to further open its
China
Deal outlook financial market to the global investors.
• On 8 October, Hong Kong Insurance Authority granted its first virtual general insurance license to Avo Insurance as
L H an attempt to encourage wider use of technology by Hong Kong’s insurers. The new license will allow the company
to sell a range of related products including property, travel, fire and car insurance online directly.
• Despite the recent unrest in Hong Kong, investors retain faith in Hong Kong capital market evidenced by the listing
of Budweiser Brewing Company APAC which raised $4.8b in its initial public offering, representing the second-
largest offering worldwide in 2019.
1 $10m • Insurance businesses are exploring affinity partnerships with online platforms. An example of such collaborations
-86% -100% include investment from Allianz Digital into the Google and Tencent backed Go-Jek – the idea being to increase
customer touchpoints to insurance products and expand services for Go-Jek customers.
Indonesia
Deal outlook • Indonesia’s OJK is looking to ease bank merger rules to encourage consolidation. The regulator is drafting new
legislation to issue later this year that will ease restrictions on investors owning more than one business.
L H • OCBC has shown interest in the ~$1.9b stakes owned by Standard Chartered and Astra in Bank Permata. OCBC
already owns Bank OCBC and, under current regulation, may have to merge the two under Indonesia’s single-
presence rule.
M&A Quarterly Update October 2019
PwC 5APAC M&A trends
# of deals Size of deals
QoQ change QoQ change Key trends
(2)
20 $(102)m
$4,402m • Japan's FTC have finally approved the merger of Fukuoka and Eighteenth Bank. There were concerns over the
-67%
+100% -99%
+268% monopoly the newly-created bank would have in the Nagasaki prefecture, however, the banks sold $905m worth of
loans to satisfy the FTC. This merger could be the first in a number of potential regional bank mergers as loan
Japan
Deal outlook demand remains weak, competition intensifies and negative interest rates persist.
• Tokyo Century Corp have announced they will turn Aviation Capital Group into a wholly owned subsidiary and
L H purchase the remaining 75.5% for $3b. Tokyo century initially acquired 20% in 2017 and has since increased its
ownership to 24.5%. This continues the trend of Japanese companies looking externally for growth opportunities.
• Tokio Marine has agreed to buy US insurance group Pure Group for $3.1b, evidence that Japanese insurers
0 $264m continue to look offshore to find growth opportunities amidst a stagnant domestic market.
0% +N/A%
• Sumitomo Life Insurance Co. has purchased a stake of about 25% in Singapore Life for $90m in a drive to capitalize
on the fintech startup’s long-term growth.
8 $954m • Financial institutions continue to look for expansion opportunities in SE Asia, as evidenced by Hana Bank acquiring
-38% -65% 15% stake in a Vietnamese bank. Various financial institutions are also looking to enter Myanmar, applying for
South Korea licenses for operation including credit card, micro-finance and commercial banking.
Deal outlook • Inbound or domestic deal activities is expecting to be low in the second half of 2019, with limited available targets,
such as ABL Life and Dongyang Life, available on the market.
L H
• Government continues to promote fintech, with virtualization policies expected to expand into other areas such as
asset management, insurace sales, etc. The 3rd and 4th internet bank license were being promoted to strengthen
the banking industry's competitiveness, with Kiwoom Bank and Toss Bank expecting to re-submit their application,
despite the profitability of internet banks remains a concern.
1 $39m • In August, Bank Negara Malaysia (“BNM”), the Malaysian central bank, opened virtual banking license application;
+N/A% +N/A% however, the number of licenses was not disclosed. To date more than 10 parties have signalled their interest,
including Grab, and at least four banks CIMB Group Holdings, Affin Bank, Hong Leong Bank and AMMB Holdings.
Malaysia
Deal outlook • AmGeneral Insurance and AMMB Holdings, and Allianz Malaysia, a Malaysian insurer, have ended their merger
talks. One of the reasons to end the talks was over concerns by BNM that the combined market share of the two
L H entities would create a monopoly in the market.
• To deepen its focus on small and medium enterprises and consumer banking moving forward, Alliance Bank
Malaysia was looking for an outright sale or reducing its stake in Alliance Investment Bank, which has received sign
of interest from four parties including Kenanga Investment Bank.
M&A Quarterly Update October 2019
PwC 6APAC M&A trends
# of deals Size of deals
QoQ change QoQ change Key trends
(2)2 $(102)m
$46m • M&A activities were seen in the rural banking sector. Union Bank of the Philippines announced plans to acquire two
-67%
+N/A% -99%
+N/A% rural banks in Luzon and Visayas, to expand their rural banking presence. Producers Savings Bank Corp completed
mergers with seven other rural lenders to heed the call of BSP for mergers and consolidation in the industry.
Philippines
Deal outlook • In Sept 2019, Singapore-based insurtech company, Axinan, has entered the Philippines market via a strategic
partnership with non-life insurer Mercantile Insurance Co. The partnership is one of the first in the Philippines
L H between a non-life and an insurtech player. The two firms will introduce a smartphone insurance product leveraging
Axinan's proprietary technology and Mercantile's niche non-life insurance expertise.
• Bank of China Manila was designated as the clearing bank for renminbi-denominated transactions in the Philippines
0 after an agreement signed on Sept 18. It is expected that this will help local banks provide clients with services in
0% entering the Chinese financial market, increase RMB assets or diversify investment portfolios.
6 $128m • 5 new digital banking licenses, 2 full and 3 wholesale licenses, will be issued by the end Q2 2020. We expect non-
-63% -87% financial service companies, notably technology companies, to form partnerships with domestic companies and
compete with traditional banking players.
Singapore
Deal outlook • In the insurance space, a number of deals are driven by distribution channel expansion. Insurance companies are
acquiring and partnering up with insurance distributors and wealth managers to expand their market share.
L H
• Singapore Life, a Singapore based insurtech startup, has completed a number of funding rounds in 2019. Notably,
they received a $90m funding from Sumitomo Life Insurance in Q3. The startup space will continue to be active with
Singapore being the fintech hub of South-east Asia.
• Aviva, with its regional headquarters in Singapore, is reviewing the future of its Asian operations which include
subsidiaries in China, India, Singapore, Vietnam, Hong Kong and Indonesia.
4 $8,278m • Traditional banks are strengthening their capabilities through mergers and acquisitions amid intense competition
+N/A% +N/A% with their counterparts and other tech companies providing mobile payment services. Siam Commercial Bank has
Thailand invested in Indonesian ride-hailing startup Go-Jek to expand its digital finance business, whilst Kiatnakin Bank is
Deal outlook looking to expand its wealth management business through a merger.
• Prudential’s Eastspring Investments has agreed to acquire 50.1 per cent of Thanachart Fund. Following the
L H acquisition, Thanachart's customers will have access to Eastspring'sinvestment solutions. However, completion of
the deal is conditional on acquisition of Thanachart Bank by TMB Bank.
• Southeast Group, a holding company controlled by TCC Group, has struck a deal to amalgamate with Thai
Insurance Plc. The deal is expected to create economies of scale, and diversify the Group’s businesses to meet
their customers' needs.
M&A Quarterly Update October 2019
PwC 7APAC M&A trends
# of deals Size of deals
QoQ change QoQ change Key trends
2 $879m • Q3 was an active quarter in the insurance market with BNP Paribas Cardif likely to announce the $400m sale of its
+100% +17,480% stake in its insurance JV with Vietcombank to FWD as well as a new bancassurance distribution agreement.
• Bank for Investment and Development of Vietnam (“BIDV”) is also exploring selling its stake in a life insurance JV
Vietnam Deal outlook with MetLife. Suggesting, like Vietcombank, the bancassurance partner could change.
• Aviva is undertaking a strategic review of its Asian business, which may include a divestment of their Vietnamese
L H
operations. It is rumored a formal process is underway.
• In the banking sector, South Korea's Hana Bank is set to buy 15% stake in Vietnam's BIDV for around $850m and
Vietnam’s Military Commercial Joint Stock Bank is seeking to sell a 7.5% stake to one or more foreign investors this
year.
3 $7m
Others10
-25% -85% This quarter we focus on Myanmar…
• Myanmar’s FS industry is opening up to foreign players and is attracting inbound investment. Five foreign, wholly
Other Deal outlook owned life insurance businesses are expected to launch their operations towards the end of 2019 and six other
APAC foreign insurers, notably Japanese insurers, have been permitted to enter the market via local partnerships.
countries L H
• The Central Bank of Myanmar ("CBM") have announced foreign banks can increase their ownership in domestic
private banks to 35%. The CBM have appointed an external consultant to assist in the selection of foreign banks for
further liberalisation of the banking sector.
• Foreign banks and non-bank FIs are entering the market through investment and strategic partnership. The top 5
banks currently hold c.80% market share, many have entered into strategic partnerships with foreign banks to upskill
and expand their reach in SE Asia to better service their existing customer base.
Notes: 10) Other countries include Cambodia, Myanmar, Laos and Taiwan;
M&A Quarterly Update October 2019
PwC 8Data compilation methodology and disclaimer
Source • The data presented is based on information compiled by Mergermarket, Capital IQ and PwC analysis unless stated otherwise
Deal
• Announced deals were used in the analysis. Some announced deals might not go on to complete
announcement
• The deal volume figures presented in this report refer to the number of deals announced, whether or not a value is disclosed for
Deal volume
the deal
• The deal value figures presented in this report refer only to those deals where a value has been disclosed, and the value is
Deal value
based on the historical consideration in $.
• Inbound acquisitions are defined as a non-APAC bidder acquiring an APAC target.
• Intra-Asia acquisitions are defined as an APAC bidder acquiring an APAC target that is not a domestic acquisition.
Regions
• Outbound acquisitions are defined as an APAC bidder acquiring a non-APAC target.
• Domestic acquisitions are defined as an APAC bidder acquiring a target in the same country as the bidder.
• FS Sectors includes Banking, Fund Management, Insurance related, investment banking, Principal finance, rental and leasing,
Sectors securities and commodities brokers and Venture Capital/Private Equity, in which the dominant sector related to the deal are
presented, namely Asset Management, Banking, Insurance or Others.
• Geography on a transaction is defined by the dominant geography of the Target or Bidder. The dominant geography is the
Geography
location of the headquarters of the underlying company. Either the Target or Bidder in APAC is counted inside the presentation.
M&A Quarterly Update October 2019
PwC 9Contacts
Authors Country contacts
Matthew Phillips Iain Tan Chris ST Chan
Asia FS M&A Leader & China FS Lead Partner - Australia China / HK FS M&A Leader
E: matthew.phillips@hk.pwc.com E: iain.tan@au.pwc.com E: chris.st.chan@hk.pwc.com
Eric Darmawan Masaya Kato
Thomas Crasti FS Deals Partner - Indonesia Japan Deals Lead
China FS Deals E: eric.darmawan@id.pwc.com E: masaya.kato@pwc.com
E: thomas.m.crasti@hk.pwc.com
Joo-Cheol Lee Chi Win Liew
Korea FS Deals Malaysia Deals Lead
George Roux E: joo-cheol.fas.lee@pwc.com E: chi.min.liew@my.pwc.com
Hong Kong FS Deals
Mary Jade T. Roxas Kok Weng Sam
E: george.roux@hk.pwc.com
Deals Leader Philippines FS Deals Leader - Singapore
E: jade.roxas@ph.pwc.com E: kok.weng.sam@sg.pwc.com
May Chen
Hong Kong FS Deals Phuwin Norchoovech Nguyen Luong Hien
E: may.f.chen@hk.pwc.com Thailand Deals Lead Vietnam Deals Lead
E: phuwin.norchoovech@th.pwc.com E: nguyen.luong.hien@vn.pwc.com
Janeshwar Teja Pachigolla
Myanmar Deals Lead
E: janeshwar.pachigolla@sg.pwc.com
M&A Quarterly Update October 2019
PwC 10Thank you pwchk.com This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors. © 2019 PricewaterhouseCoopers Limited. All rights reserved. PwC refers to the Hong Kong member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details. HK-20190418-3-C1
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