Market access

Technology and Market Access Drive Strong M&A Performance

The past year has seen strong M&A activity around the world, with many companies turning a profit for the first time in five years. However, insurers were less active on this front as many were still consolidating their assets and had a cautious view of the impact of COVID-19 on the global economy. We take a look at the trends that drove M&A activity in 2021 and what could be trending in 2022.

Global M&A activity posted a positive performance for the first time since 2016. Based on stock price performance, companies engaging in M&A transactions outperformed the global index by +1, 4 percentage points on average, according to Willis Towers Watson (WTW).

The data the broker collected also revealed that global activity hit a new high as there were 1,047 closed deals worth over $100 million in 2021. This is a significant increase from to the previous year (674) and is the highest annual volume since WTW. analysis began in 2008.

For the year as a whole, APAC traders posted their best performance since 2016, outperforming their index by +16.8pp, despite closing a fraction of more deals regionally than to 2020 (196 vs. 173) as the decrease in Chinese acquisitions continued to drive down volume levels.

The data also shows a changing landscape of transactions by Asian companies. “More than one in four transactions by Japanese companies is still cross-regional (outside of APAC), while this factor is only around one in 20 for Chinese companies,” said Massimo Borghello, head of of WTW’s human capital M&A advisory, APAC.

Insurers’ activity was weak

For insurance, however, the M&A market in Asia has been fairly quiet in 2021. “Caution remains as trader confidence weighed down by COVID-19. There was some optimism in 2020 regarding the M&A market, but as the pandemic continued, that enthusiasm faded. Uncertainty is the enemy of mergers and acquisitions, and buyers considering potential targets are simply unsure of their medium-term performance,” said Joyce Chan, partner at Clyde & Co.

Among all the deals completed in 2021 and valued at over $100 million, there were two insurance M&A deals in APAC and they were: AIA-Bank of East Asia Life in Hong Kong and Steadfast-Coverforce in Australia.

“However, a few others have been announced in the sector but are still in the process of regulatory approval, such as acquisitions by HSBC Life in Singapore, by Generali and Liberty Mutual in Malaysia and by Chubb at the multi-country regional level. Going forward , there could be more M&A activity than indicated in the closed deals database,” Borghello said.

Non-insurers cede insurance assets

As highlighted by AIA’s acquisition of the life insurance arm of the Bank of East Asia, many non-insurance businesses are shedding insurance assets to focus on their core businesses. Additionally, under the terms of the agreement, AIA will have an exclusive 15-year distribution partnership with the bank, a valuable strategic alliance that will allow it to expand its customer base. Both of these trends are likely to continue, Chan said.

At the same time, most insurers are focusing on technology in the deals they closed last year. The focus on pure innovation has faded slightly, with companies instead expanding their use of existing technologies to enhance and enhance the customer experience.

“For example, through the use of better data analytics and artificial intelligence at every stage of the insurance cycle, from quoting to underwriting to claims processing. Any potential tie-up that can help achieve that goal will be attractive,” she said.

Improve digital capabilities

The appetite for acquiring digital capabilities and digital talent will continue to drive deals in the InsurTech space, Borghello said. “The so-called big resignation, which has forced companies to reassess how to retain and acquire new talent in a scarce job market, will continue to be a factor with companies under pressure to acquire top-notch talent. range in areas such as cyber security and software engineering.

WTW M&A data reveals 293 large and mega deals, those valued at over $1 billion, closed in 2021, the highest number on record as companies shape their post-COVID future through transformative acquisitions. That figure could well be surpassed in 2022 as cash-rich companies and investors continue to seek acquisitions in areas where they need to expand or add capacity.

He noted that the impact of regulatory changes that have relaxed foreign ownership limits will also be a determining factor for transactions in 2022. “Foreign multinationals will also have different strategies, with some doubling down on the Asian region and others limiting or reducing exposure. This will result in the conclusion of more agreements this year.

Climate change at the heart of concerns

He also shared his top trends for deals happening this year, including ESG concerns, supply chain self-sufficiency and accelerating digital transformation.

“ESG priorities are rising to the top of CEO agendas, with greater emphasis on engaging employees in a hybrid world of working and buying, streamlining or disposing of assets to improve their environmental footprint. Themes such as decarbonisation will lead to deals and there will also be opportunities for new business emerging from climate risk mitigation innovation,” he said.

Ms. Chan shared the same sentiments, noting that these are hot topics for corporate boards around the world. “This year, more and more, we will see ESG initiatives occupying an increasingly prominent place on the agenda of insurers. This can impact mergers and acquisitions – targets with weak ESG credentials could be perceived as unattractive. Conversely, those offering products or services that support the ESG agenda are likely to be in demand.

She added that there will be a relatively subdued appetite for mergers and acquisitions in Asia as investors look to other avenues for growth. “Accessing new territories and new customers by setting up operations is an option. Late last year, China Pacific Life Insurance obtained a license to enter the Hong Kong life insurance market. We could see others looking to make similar moves, attracted by regional and international growth opportunities without having to deal with the legacy issues often associated with an acquisition.

Another alternative to mergers and acquisitions is to enter into agreements with distribution partners in industries other than insurance that allow insurers to expand their demographic reach without having to acquire a company. This is a growing phenomenon across Asia, she said.

Mr. Borghello said: “It seems unlikely that China will continue to drive international and cross-border transactions, which could serve to boost activity in other places such as Japan, India and South Asia. South East. This trend is already evident in our data, which reveals that cross-border M&A activity in 2021 remained flat despite the decline in deals from China. A