After a notable decline in 2024, mergers and acquisitions (M&A) in the Asia-Pacific (APAC) financial sector are poised for a resurgence, according to S&P Global Markets Intelligence.
This anticipated uptick is driven by expected interest rate cuts and easing inflationary pressures, creating a more conducive environment for deal-making.
In 2024, the APAC region experienced a 19 percent drop in strategic M&A activity, amounting to $584 billion, marking a global low for the decade.
This downturn was largely attributed to tight financial conditions and elevated inflation rates, which deterred investment and acquisition initiatives.
The number of deals in the region’s financial sector dropped 2.4 percent to 560 in 2024 from 574 in 2023, dragged by slower activity in the insurance and other nonbanking financial industries, according to data compiled by S&P Global Market Intelligence.
The banking, specialty finance and payments industries recorded year-over-year increases in deal counts in 2024.
Although there was a notable decline in M&A activity in 2024, the economic landscape is shifting. Central banks across the region are signaling a transition from monetary tightening to easing policies.
The easing of inflationary pressures further bolsters this positive outlook. As inflation rates decline, real policy rates rise, prompting central banks to reduce nominal rates to alleviate potential strains on economic growth, employment, and wages. This monetary easing has commenced in the latter half of 2024, setting the stage for economic recovery and renewed M&A momentum in the APAC region.
Market sentiment is also improving, with increased CEO confidence and a resurgence in bank risk appetite. Boards are becoming more inclined to approve M&A activities as a strategic avenue to counteract slowing organic growth. Financial sponsors, managing an estimated $ 2.8 trillion in unrealized investments, are poised to reactivate their deal-making endeavors.
The convergence of anticipated interest rate reductions, easing inflation, and revitalized market confidence is setting a robust foundation for a rebound in APAC’s financial M&A landscape, experts said.
Stakeholders are optimistic that these developments will reverse the previous year’s downturn, fostering a dynamic and prosperous period for mergers and acquisitions in the region.