India, China to account for 86% of M&As: PwC

China and India will account for 86 per cent of mergers and acquisitions (M&As) in the financial services space in the next five years, said the second Asia financial services M&A survey by PricewaterhouseCoppers (PwC).

The survey conducted on 230 financial services executives in Asia, said growth rate of M&As in India increased from 36 per cent in 2005 to 39 per cent in 2007 due to underlying economic growth conditions.

In China, M&As in financial services is expected to come down from 52 per cent in 2005 to 47 per cent, the PwC survey said. The growth in M&As is likely to gather steam as firms within the region and and outside are looking to Asia as the home for growth, it said.

M&As in the sector, including insurance, skyrocketed by 66 per cent to $64.5 billion in 2006 from $38.8 billion in 2005.

According to the survey by PwC Economist Intelligence Unit, nearly 74 per cent of respondents said their organisations will witness M&A activities in the coming five years compared with 68 per cent respondents in 2005, when the survey was first conducted.

About the principal barrier to M&As from a company point of view, half of the respondents cited the high pricing.

Concerns over value for money will undoubtedly lead some organisations to put more emphasis on organic growth plans. HSBC, for example, has already stated that it plans to rely on organic growth in the region, partly because of high prices. Standard Chartered may also follow it.

"We are going to focus on organic growth because the opportunity of growing organically, according to Jaspal Singh Bindra, Standard Chartered regional CEO for South-East Asia and South Asia.

Approximately 69 per cent of the respondents said joint ventures (JVs) and partnerships will be key to their expansion plans in Asia.

It seems that many firms feel they have exhausted their options in China and India and so they are looking for smaller markets, different deals, structures and alliances, said Karen Loon, partner, PwC (Singapore).

Ian Hargreaves, fund manager of the Asian investment team of Invesco Perpetual, said outside China, banking offers a lot of value for investors.

ASIAN TIGERS

Growth rate of M&As in India increased from 36 per cent in 2005 to 39 per cent in 2007 due to underlying economic growth conditions

In China, M&As in financial services is expected to come down from 52 per cent in 2005 to 47 per cent

M&As in the financial sector, including insurance, skyrocketed by 66 per cent to $64.5 billion in 2006 from $38.8 billion in 2005

The survey was conducted on 230 financial services executives in Asia

Approximately 69 per cent of the respondents said JVs and partnerships would be key to their expansion plans in Asia