In Asia lately, it pays to be a seller -- even if you're a company under pressure to offload an asset or two.
That's not normally the case. Sellers under pressure typically command lower prices. But a few factors, including the strong economic environment holding up across Asia, are turning that rule upside down.
Despite a few bumps in the region's markets, confidence is up among executives, as are corporate valuations.
The market for buyers right now is terrible, said the head of an Asia-focused private equity firm, who did not want to be named. The reply was tongue-in-cheek, though with a whiff of real frustration. There's just a lot of liquidity out here. Sellers are asking for high prices.
Of all the barometers used to gauge the current strength of Asia's economic climate, the M&A market shows particularly bullish signals. Bankers in this business are always bullish ... but the prices paid for some assets sold by what are technically distressed sellers have raised eyebrows.
American International Group, shedding units globally after a U.S. government bailout, sold its Taiwan life insurance unit for $2.15 billion last month. Two months earlier, media reports and sources said the company seemed to be having a hard time attracting more than $1.5 billion.
A day later, ING, the Dutch financial group restructuring after its own massive government bailout, sold its Asia private banking unit for $1.5 billion -- around 5.8 percent of its assets, or more than double what two buyers paid for ING's Swiss banking units earlier in the month. [ID:nSIN503877]
The ING sale underscored the Asia scarcity factor that bankers and investors point to when considering the high prices being paid. In an emerging market region, few opportunities have existed to scoop up an asset as prized as ING's.
Only recently, market chatter indicated Citigroup, another bailed out U.S. financial institution selling assets worldwide, would not get as much as it had hoped from the sale of its Japanese telemarketing group.
But on Wednesday, Reuters reported that Bain Capital was in exclusive talks to buy the group, Bellsystem24, for what sources said could be more than $1 billion -- up to 15 percent higher than other suitors had offered.
Bankers say the tide has turned faster in sellers' favour in Asia because of the momentum built after the region survived the financial crisis largely intact. Where sellers in the United States and Europe may struggle to generate competitive auctions, Asia is thriving.
True, M&A volumes in Asia and across the globe are down from where they were in 2007. But Asia's deal volume has fallen less dramatically than the United States or Europe.
The region's continued growth potential still makes it a compelling investment destination for a company or a financial investor staring at a profit plateau at home.
Look at the auction of Aircel's telecom towers.
Sources say the India-based sale is attracting offers above the $1.5 billion expected. American Tower, Tata Quippo, an unlisted firm which counts the Tata conglomerate as a partner, and GTL Infrastructure are among bidders for India's last remaining large tower business, sources have said.
The momentum is shifting to sellers. As long as the liquidity is sloshing around, sellers, however distressed they may be, will be in a position to command, a banking source said. The source did not want to be named as he is not authorised to speak to the media.
The price paid for ING's Asia banking unit attracted enough commentary to prompt the buyer Oversea-Chinese Banking Corp Ltd's CEO to say publicly his bank was not embarrassed or surprised at the deal value, which it thought was healthy.
(Editing by Ian Geoghegan)