Understanding Asia: Where’s Hot and Where’s Not for Creative and Technology M&A

By Alistair Angus, Partner, SI Partners

Asia’s phenomenal growth makes it instantly attractive for M&A in the creative and technology sectors. However, Asia is huge, diverse and its growth manifests itself very differently in each market. Complexity is compounded by languages, cultures and local regulation. But this does not prohibit Asian expansion, as with specialist advice there are exciting opportunities. Over the past five years SI Partners has worked with multiple clients and on numerous transactions across the region, which puts us in a unique position to understand the region at both a macro and micro level.

Hong Kong and Singapore are remarkably easy to access as a European or North American business. Both locations make a good headquarters for companies and present a comfortable gateway to the greater Asia market. Both HK and Singapore are strong markets given their relative size, but they are constrained by a lack of large domestic clients, which inhibits the growth of local agencies. To build scale, you quickly have to move beyond them.

By far the biggest Asian market is China – with more growth, more big brands and more potential than any other individual market. China is an increasingly sophisticated market in terms of the demands made on agencies from both domestic and international brands. China is a big leap form London or New York. However, there are real rewards to be reaped when you get it right.

Southeast Asia is another major market. Although still very focused on engagement and activation capabilities, we have noticed a shift towards more sophisticated, strategic and insight-based products and services. Indonesia is attractive because of its large population, but the independent agency market is relatively under-developed, presenting challenges as well as opportunities. Thailand has a good reputation for creativity, especially in award-winning and humorous advertising, but again the independent sector is limited. The rest of Indo-China is still at a very early stage of development, with Vietnam being probably seeing the most activity. Myanmar may be tiny, but it’s exciting because it’s new.

Japan, like Korea, has a number of strong domestic companies that have successfully internationalised and all aspire to grow their businesses. They are tough markets to get into due to their local dominance and the absence of large independents offering a route in via acquisition. There are ways in if you have the local knowledge and time to invest in building relationships.

India is a really exciting market with massive growth and lots of cutting-edge technology being adopted by millions of new users. Here again the independent sector is less developed with many small businesses but few scale independents.

Australia has some highly skilled and competitive businesses, but they are often limited by their location and a relatively small domestic market. However, Australia can provide internationalising companies with talented agencies in a convenient time-zone for the rest of Asia.

For all its idiosyncrasies and challenges, you can’t ignore the energy coming out of Asia. Despite the smaller scale and less developed independent sector and the limitation of any single domestic market, there is a huge amount of innovation and some really exciting and progressive companies creating really original work and innovative services.

Asia is a very stimulating market where growth is not typically an issue. It is all about getting the local expertise to guide you through the differences that make each of Asia’s individual markets unique.

 

Alistair is a co-founder and Partner at SI Partners. He leads the firm’s global M&A practice, advising creative and technology businesses on growth and commercial improvement and connecting clients with global investors and partners. If you’d like to discuss expanding in Asia or global growth with Alistair, don’t hesitate to get in touch.