Asia – Bright spots

Flexible deal structures in shifting market 

In 2024, we saw a trend towards more complex deal structures, particularly for inbound investments. For example, alongside pure equity investments, we saw investors seeking to include convertible or debt instruments to manage risk and maximise investment returns, including in competitive processes initially launched to seek pure equity investments. We are also seeing parties considering staged transactions, allowing participants the flexibility to proceed with investments or acquisitions on a phased basis or seeking to undertake pre-sale restructures that allow buyers to avoid exposure to areas of business or geographies that do not align with their strategy or risk appetite. We expect these structural complexities to continue in 2025 as market participants carve out pathways to getting deals done. 

Hot spot markets in Asia

A small number of jurisdictions were the key drivers of M&A activity in Asia in 2024, including Japan, India and parts of Southeast Asia. These areas caught the attention of investors due to strong economies, difficulties in deploying capital in otherwise popular markets like China, and eased foreign investment policies. For example, Indonesia made conditions easier for foreign investment in its energy sector to attract funding for renewable energy projects. In 2025, these areas are likely to remain popular. Many clients have told us that they will continue to pursue opportunities in India and Japan and are considering investing in Southeast Asian countries like Indonesia, Thailand, and Vietnam.

Energy

The energy sector and energy transition ambitions have been strong contributors to activity for a few years now. In 2025, the demand for power and energy will continue to outgrow supply and to drive deals.

Transactions in renewable energy are expected to increase as governments, industries and individual companies draw closer to the soft target deadlines put forward by the Paris Agreement (to reduce emissions by 45% by 2030 and reach net zero by 2050). 

Private capital investment

Private capital deal activity has increased slightly in 2024 when compared to 2023 and it is set to be a growing driver of activity next year. The last 12 months saw several competitive auction processes involving a number of private equity bidders willing and eager to compete with each other and strategic buyers for the right assets. 

There is also still an ample amount of capital which has been raised but not yet invested. As of end of 2024, undeployed capital in Asia-focused private capital buyout funds remained high at $81.7 billion. With a typical investment cycle of five years, we would expect many private capital investors to start to look at exits in 2025 and beyond for investments made in 2020. Due to the lack of certainty around interest rates, there has been a backlog of unsold investments and record levels of private capital dry powder. This growing need to deploy and exit will continue to drive activity next year.

From a sector perspective, private capital investors have been attracted to healthcare assets, with growth in this sector being fuelled by ageing populations and a growing middle class with greater disposable income. Another area of focus has been the digital infrastructure space with investment in data centres in particular being made in response to unprecedented demand driven by the artificial intelligence (AI) revolution, as well as broader digitalisation of the global economy. In 2024, Blackstone made its largest recent investment in Asia Pacific in AirTrunk, the largest data centre platform in the region, with a presence across Australia, Japan, Malaysia, the Hong Kong SAR and Singapore. We expect both trends to continue, with investments predicted in hospitals, pharmaceutical companies, fibre and telecommunication assets for 2025. 
 

Southeast Asia and Singapore

In 2024, Southeast Asia saw mixed activity levels. On a region-wide basis, there was a reduction in the number and value of inbound and outbound deals from 2023 levels, but regional M&A deal values grew. Certain jurisdictions, such as Malaysia and Thailand, recorded an increase in both overall deal value and volume and there has been a growth in mega deals. Given its strategic location coupled with a large middle-class population, Southeast Asia's role will be significant on the global M&A stage. Whilst it may be some time before this diverse and multi-jurisdictional region experiences a true M&A boom, the ingredients are coming together for a steady rise in activity over the coming year.

Singapore continues to be the powerhouse of the region's big-ticket M&A, with a higher deal value recorded in 2024 despite a significant decline in deal volume. We have also seen an increase in domestic and inbound M&A activity in both the industrials and energy transition sectors. We expect this trend to continue in 2025 with more Singapore-headquartered targets being the subject of transactions.

Digital infrastructure, energy transition and healthcare were the hot sectors in the region in 2024 and this focus looks set to continue in 2025 with a number of assets coming or expected to come to market across the region.

Indonesia

Indonesia has experienced economic and political stability over the last decade and we expect new President Prabowo to broadly continue with existing economic policies. Indonesia has ambitious goals – and is seeking new investment worth more than $800 billion, equivalent to 65% of its current GDP, within the next five years to reach its 8% economic growth target, compared with 5% currently. To support foreign investment, the Indonesian government has also undertaken proactive measures in enhancing the investment climate, including through legislative reforms, simplification of business operations and digitising the registration and licensing process.

With these measures and investment goals in place for 2025, we expect M&A activity to continue to grow steadily with an increasing level of sophistication and complexity.

We expect technology to be one of the major drivers for M&A deals in Indonesia in 2025, alongside the infrastructure (including digital infrastructure), financial services and healthcare sectors. Traditional energy (oil and gas) and renewables (geothermal, solar) will also continue to be active.

Thailand

Thailand's economy has shown resilience in the last year. We expect to see robust M&A performance in 2025, driven by strategic consolidations locally and continued increase in foreign investment. Also, the government's 'Thailand 4.0 Economic Plan' will serve as a good foundation to drive M&A activity in the coming year.

There will be strong inbound interest from overseas investors into Thailand, with higher levels of M&A activity anticipated in the digital economy and data centres, infrastructure and energy transition sectors. The global drive for supply chain diversification with the ‘China Plus One’ strategy will also lead to increased FDI in Thailand’s industrial estates, particularly in the electronics, automotive, and consumer sectors.

ESG will also continue to play a significant role in investment decisions and the Thai government is actively implementing a range of green initiatives such as incentives for EV production and a clean energy finance and investment roadmap.

China (including Hong Kong)

With the Chinese economy slowing in recent years, M&A activity continued its downward trend in 2024. However, with falling interest rates, new stimulus measures and the high amount of undeployed capital for Asia-focussed private capital funds, many are expressing cautious optimism that China M&A activity and the overall economy will rebound in 2025.

We have received feedback from multinationals as well as private capital clients that they remain committed to the Chinese market and, despite recent developments, this may translate into divestment and other strategic opportunities. China is advancing on a number of fronts and developing new investment corridors, and we expect to see an increase in M&A and joint venture activities in a number of sectors, including the EV and battery sectors. Also, lower valuation levels and the backlog of deal opportunities may result in a more favourable environment for potential buyers. In 2024, despite continued tensions around trade, the US was the largest inbound acquirer into China by value. However, as Trump's second presidency begins, we expect some may take a wait-and-see approach.   Nevertheless, while competition continues between the US and China on certain fronts, there remains room for the two states to cooperate. 

In Hong Kong, overall sentiment improved in H2 2024. Capital markets activities revived noticeably and this trend is expected to continue into 2025. We also expect to see the trend of privatisations of listed companies to continue in 2025.

Japan

Driven by lower local interest rates and shifting international investor perceptions, Japan has emerged as the most dynamic private capital market in Asia, and this will continue to drive M&A activity in 2025. We have seen strong interest in Japanese assets, in particular in both the consumer and real estate sectors – for example, if it completes, Couche-Tard's bid for 7-11's owner, Seven & iHoldings (valued at $58.9 billion) will be the largest inbound deal in Japan on record.

Given AI is more prevalent than ever and that Japanese companies will need to keep up with this trend to remain competitive on an international level, we expect to see more tech M&A deals being done in Japan in 2025.

South Korea

South Korea has experienced a politically turbulent end to the year, with repercussions expected to continue into 2025. This political instability will inevitably impact the confidence of economic players and the M&A market. Additionally, as China is the country's largest trading partner, the South Korean economy will likely face challenges from increased tariffs with the return of Donald Trump to the White House in the US. Nevertheless, it is reasonable to assume M&A activity will remain robust in 2025, driven by the technology sector (including semiconductors, EVs, batteries, AI, and robotics). Restructuring operations in traditional industries such as shipbuilding, construction, petrochemical and utilities are also expected to contribute to M&A activity. Read more in our South Korea report.

India

Over the last few years, Indian M&A has gone from strength to strength, contributing significant deal volumes to the Asia-Pacific Region. Although the Indian market was resilient in the face of a global slowdown, activity has still been growing at a slower pace than hoped for (as was the case globally).  Nonetheless, geopolitical factors are tipped in India's favour, with investors looking to India as part of the China-plus-one strategy. This, along with the expansion of the Indian manufacturing sector, will help cement India's position as a key investment destination.

Despite inflationary pressure, the Indian economy appears to be on a continuing trajectory of growth and expansion, which is expected to continue in 2025 and which will encourage private investment.  Encouraging changes in the Indian legal framework, and the government's continued push to improve ease of doing business, are expected to support a growing M&A market in 2025.

Read more in our India report.