Despite global M&A volatility that began with the pandemic, dealmakers continue to find growth opportunities across Asia–Pacific (APAC). The region contributed more than 45 percent of global GDP and roughly two-thirds of global economic growth in 2023, even though China’s uptick after its postpandemic reopening is fading sooner than many observers expected.1

Research suggests that in the year ahead, Asia will be home to more than 80 percent of the world’s “new consumers”—tens of millions of people who can afford to spend $12 or more per day for the first time—and that the consuming class will outnumber the vulnerable and poor in the region for the first time in history.2

That growth helps explain why large companies and investors around the world are considering acquisitions in the region despite continued economic volatility and geopolitical uncertainty. While APAC deal value fell by about 19 percent in 2023—reaching its lowest level since 2013—it still accounted for about a quarter of global activity, in line with the five-year average (Exhibit 1).

Domestic in-country activity within the region still accounts for more than 70 percent of M&A value, but the share of activity originating from the Americas and Europe, the Middle East, and Africa (EMEA) rose in 2023 (Exhibit 2).

Many acquirers in slower-growth regions, especially the United States and the European Union, found promising targets in APAC in the fastest-growing countries and in those with less geopolitical risk, such as India—which many economists expect to lead the region with annual growth of about 6 percent in the years ahead—as well as Indonesia, Malaysia, and Vietnam.3

In contrast, GDP growth in 2023 was just 0.6 percent in the European Union and about 2.6 percent in the United States.4
Foreign direct investment in China declined in 2023, partly because of geopolitical tensions and tougher regulatory scrutiny.5

The region overall had net-positive deal inflow for the first time in five years. Most net inbound activity was in Australia and India, offset by Japan, which saw more outbound than inbound deals in 2023. Cross-border in-region deal value rose from 7 percent of total inbound activity to about 12 percent, due mainly to a few large deals between companies in Singapore and Greater China. Investors in the Middle East are showing more interest in the region.

About 65 percent of deal value in 2023 occurred in four sectors: energy and materials; advanced industries; tech, media, and telecom (TMT); and financial services.

Deal value varies widely by country and sector, of course. Energy and materials—disproportionately large industries in Australia—led the way, followed by advanced industries and tech, where many acquirers seek to gain scale to become more competitive, set the stage for larger investments, and capture opportunities in growing countries.

Multinational companies (MNCs) headquartered in countries where growth is slower will continue to look for opportunities in APAC as they enter new businesses, diversify, advance decarbonization and sustainability initiatives, and consolidate operations. And as disruptions accelerate in nearly every industry, many companies will see M&A as a key to reorienting their strategies and business models. Some will manage the risks of entering complex new marketplaces through partnerships and smaller acquisitions. Deals worth less than $1 billion represent about half of M&A deal value in Asia today compared with the Americas, where only a fourth of value is represented by transactions under that threshold.

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Sophisticated investors and strategic acquirers know that finding and vetting suitable targets can require exceptional insights and skill, including strong local deal teams and relationships with local stakeholders, including business leaders and government officials.

They also understand the potential challenges of due diligence in the region. Many countries in APAC impose fewer regulations on companies than do the United States or European Union; for example, target companies may disclose less about their accounting and risks, and governance may be less strict. And once a deal is closed, cultural, legal, and political differences can make integrating an acquisition more difficult.

Despite these and other complexities in the marketplace, four main trends emerged in 2023 that we expect to drive inbound deal activity by MNCs in Asia in the year ahead:

Although the APAC region faced multiple market and macroeconomic challenges in 2023, many clients tell us they have a stronger appetite for deals in 2024, pointing to expectations for more macroeconomic stability due to factors such as robust GDP growth in most parts of Asia, softening inflation and interest rates, and more supportive policies and regulations in many Asian countries.

Learning from the best programmatic players and our experience in working with leading companies across industries and around the world, we have identified four main capabilities that distinguish the most successful acquirers in the region:14

We urge acquirers to pay close attention to cultural differences at every stage of integration, especially “the way things are done”—such as working norms, governance practices, and decision-making processes—at acquired or partner companies.

For example, when a US-based electrical equipment manufacturer acquired part of a Japanese conglomerate, it spent a couple of months carefully evaluating both companies’ cultures. Based on gaps and unique strengths it identified in workshops, the manufacturer developed a holistic action plan to align both organizations with a new shared culture. (For more on this topic, please see “The culture compass: Using early insights to guide integration planning” and “M&A and Asia: Learning from the best.”

The APAC region will continue to offer extraordinary growth opportunities in some of the world’s largest industries. But each country in APAC is unique and presents potential acquirers with a wide array of shifting opportunities and risks. We expect the most successful dealmakers to invest heavily to maintain deep, up-to-date insights into those marketplaces and into the stakeholders who can determine the ultimate outcome of any deal—from local communities and employees to shareholders, legislators, regulators, and consumers.

Equipped with this knowledge and a commitment to careful, culturally astute integration, the most sophisticated investors and strategic acquirers will create enormous value in APAC in the years ahead—not just for their own shareholders but for the entire region.