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M&A activity among financial institutions in Asia is expected to gain momentum, spurred by the promise of market liberalisation - whether real or imagined.
The results of a survey of 130 senior executives in Asia's financial services industry conducted exclusively for this briefing, prepared by the Economist Intelligence Unit for PricewaterhouseCoopers, suggest that the trend toward cross-border M&A, will gather momentum in the coming five years, despite continuing obstacles posed by regulatory environments and corporate cultures.
The survey respondents were a mix of Asia-headquartered institutions (48%), and regional subsidiaries of foreign institutions.
The results of our survey were striking in the way respondents' answers clustered strongly around six primary themes:
- Competitive pressures define today's financial services industry, and institutions must be prepared for larger, more aggressive M&A, joint venture and partnership deals.
- Organic growth offers advantages, but it is not enough - or even possible - in many markets.
- Regulatory obstacles are transitory, and should not dictate strategy.
- Focus must be maintained, and M&A applied to hone competitive edge.
- Economies of scale are an important driver of deals but difficult to achieve in Asia.
- Opportunity abounds - but there are risks as well.
As the survey results lay bare, financial services executives in Asia today face growing pressure to satisfy shareholders, please customers, and capitalise on their successes. With falling barriers, the threat of new competition continues to escalate, and prudent executives have no choice but to maintain a constant surveillance of new market trends and growth opportunities, all the while trying to maintain a consistent corporate culture across disparate ethnic cultures and incorporating any acquisitions already made.
According to our survey, to succeed financial services executives will need to do the following:
- Be prepared for larger, more aggressive M&A, joint venture, and partnership deals.
- Know their company's strengths, and apply M&A to hone competitive edge.
- Outsource back-office and other non-strategic operations.
- Pursue M&A strategies despite regulatory uncertainty, not because of it.
- Stay vigilant for operational efficiencies and opportunities for scale.
- Ensure proper risk management is in place.
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