Financial advisory fees from mergers and acquisitions in Asia dropped to the lowest levels in 11 years in the first half of 2024, with little signs of a quick rebound amid declines in both announced and completed deals.
M&A fees in Asia totalled $1.5 billion in the first six months, the lowest since 2013, LSEG data showed. Japan alone accounted for 40% of that.
The fee squeeze could add pressure to investment banks which in the past two years have already shed hundreds of jobs in Asia to cope with chilled capital markets and falling revenue.
The total value of announced transactions in Asia dropped 25% year-on-year to $317.5 billion, also a 11-year low, the data showed, indicating transaction revenue might remain tight.
Completed deals, totalling $253 billion, were the lowest since 2009, when deep wounds of the global financial crisis severely disrupted market activities.
"A reduction in average deal size is driving much of the decrease in M&A deal volume year to date, as investors prioritise mid-sized opportunities over large transformative M&A," said Tom Barsha, head of Asia Pacific M&A at Bank of America.
Australia-based miner BHP Group walked away from its $49 billion plan to take over rival Anglo American last month after a six-week pursuit, killing for now what could be one of bankers' biggest paydays globally this year.
Japan, the only market in Asia that recorded M&A growth in 2023, saw announced deals slide 23% in the first half to $61 billion amid a weakening yen.
A slowing economy coupled with rising geopolitical tensions continued to dampen investment appetite in China, with total deals down 25% in the first half to $108 billion, the lowest since the same period of 2012.
Asia's slowdown compares with a 16% up-pick in M&A globally, with deals totalling $1.5 trillion.
Some bankers in Asia expect private equity, take-privates and digital infrastructure investments will drive deals, noting more sales processes could be launched toward the end of this year.
Rohit Satsangi, Deutsche Bank's co-head of M&A, Asia Pacific, said sponsors are bringing businesses back to market.
"We are seeing more reasonable valuations supported by better financial markets and a wider group of buyers," he said.
China outbound activities have also restarted, he said, with both the private sector and state-owned companies looking for assets, in particular in Europe.
"A critical element of dealmaking which remains subdued is investor confidence, and it is intrinsically linked to capital markets activity and valuations," said Bank of America's Barsha.
Increased capital markets activity in the second quarter has resulted in increased early stage M&A discussions, which point to an improved outlook for deals, he said.
