VENUE ® ® Market Spotlight

ASIAN CROSS- BORDER M&A

September 2016 Edition

VENUE® Market Spotlight: Asian Cross-border M&A

Dear Valued Reader,

Welcome to the September 2016 edition of Venue Market Spotlight. In this month’s issue, we will examine cross-border M&A to and from the Asia-Pacific region, which continues to have some of the strongest economic growth in the world.

In line with the overall dealmaking slowdown this year, M&A activity in Asia has been somewhat sluggish in 2016, partly due to a shortage of inbound deals to APAC countries. However, outbound purchases by companies in one country in particular have been noteworthy: China. Acquisitions abroad by Chinese firms have already surpassed US$200bn this year, a record high.

This surge in activity has primarily been for US-based targets, including such recent deals as Zhongwang International’s US$2.3bn acquisition of US aluminum manufacturer Aleris. Japan and India have been relative bright spots as well in the Asia-Pacific region. Japanese companies have made several major purchases in the West, while India’s rising middle class has made it a prime target for inbound M&A activity by foreign firms.

The upswing in regional outbound M&A activity has been driven in part by recent megadeals in the technology sector. Respondents said that, in addition to the desire to expand into new geographies, many APAC firms will seek acquisitions of Western technology assets to compete on a global scale.

As the global capital markets continue to evolve to have greater cross-border interest and reach from one region to another, it is ever more important to partner with providers that understand the varying needs of different global markets. While our name may have changed this month with the completion of our spin to a stand-alone financial communications and services provider, our commitment to our global clients remains the same. At Donnelley Financial Solutions, we will continue to provide industry-leading critical business communications, data services and language solutions through the continued growth and investment into our advanced technology platforms, long-standing expertise and strong security protocols.

As always, please enjoy this month’s Spotlight.

Sincerely,

Craig Clay President, Global Capital MarketsDonnelley Financial Solutions

WELCOME

Foreword 3

Survey 4

Notable deals 10 in the room

About Donnelley 11 Financial Solutions

Donnelley Financial Solutions is the sponsor of the Venue Market Spotlight. All information contained in this publication is for informational purposes only and should not be construed as legal, accounting, tax, or other professional advice of any kind, on any subject matter. Donnelley Financial Solutions expressly disclaims all liability in respect to actions taken or not taken based on any or all the content herein.

CONTENTS

3

of respondents said the consumer sector will dominate inbound M&A activity to the Asia-Pacific region, pointing out that the region is home to a burgeoning middle class and rising levels of disposable income.

of respondents predict that outbound M&A activity will be motivated mostly by acquisitions of strategic technology. They emphasized that this will be spurred by a desire to remain relevant in the competitive technology sector.

of respondents said that cross-border private equity activity both to and from the Asia-Pacific region will increase somewhat. Many respondents believe that the volatile state of the market will play to the strengths of PE firms.

M&A activity got off to an uncertain start in Q3 2016 as a result of Brexit – no one really knew how the referendum would affect the global economy. However, equity markets quickly shook off the vote and the global economy overall seemed to take the United Kingdom’s headline-making decision in stride for the most part. Its impact on M&A also seems to have been muted, especially in regions farther removed from Europe, such as Asia-Pacific.

The Asia-Pacific region in general has seen a slower pace of dealmaking so far in 2016 than during the hugely active 2015. Through the first eight months of 2016, there were 2,535 deals worth US$453bn, compared to 2,665 transactions worth US$548bn over the same period a year prior. But outbound activity from APAC has jumped considerably, from 547 deals valued at US$177bn up to 561 deals worth US$208bn. Major contributors to the value total included Japan-based Softbank Group’s blockbuster purchase of British chip maker ARM Holdings for US$30.1bn and ChemChina’s US$45.8bn acquisition of agribusiness giant Syngenta.

With the Chinese economy continuing to experience turmoil and Western countries undergoing transformative political change, dealmakers are expecting twists and turns in the M&A environment. At the same time, respondents to this month’s survey called out specific drivers and challenges that they believe will affect cross-border acquisition activity in the region. More than two-thirds of respondents (68%) think that inbound M&A will be driven by foreign firms’ desire to expand into new Asian geographies; similarly, 84% of respondents believe that this same desire will fuel outbound M&A activity on the part of Asian buyers. However, respondents are careful to note that there will be some hurdles affecting both inbound and outbound M&A activity. Some 68% of respondents said regulatory issues will affect inbound M&A; conversely, they said geopolitical and macroeconomic uncertainty will be the main barrier for outbound dealmaking.

While there have been numerous challenges for M&A activity on a global scale, the APAC region has taken advantage of devalued businesses and divestitures – a move that has certainly contributed to prosperous outbound M&A from the region.

Other key findings include:

56%

48%

52%

FOREWORD

VENUE® Market Spotlight: Asian Cross-border M&A

SURVEY Which sectors will see the most inbound M&A activity to the Asia-Pacific region in the coming

12 months? (Select top two)

More than half our respondents (56%) said they believe the consumer sector will see the most inbound M&A activity in Asia-Pacific over the next year, followed by technology (36%) and pharma, medical and biotech (32%). Our respondents indicated that financial services and real estate in the region will receive less inbound interest.

Overall inbound M&A to Asia-Pacific has seen a drop-off this year, falling 16% by volume and 30% by value over the first eight months of 2016, to 356 deals worth US$47.8bn. However, certain industries have seen robust activity – including the consumer sector, in which the inbound deal value of US$7.2bn from January to August exceeded the 2015 total of US$4.6bn. One intriguing deal driving this value up was Netherlands-based dairy producer FrieslandCampina’s acquisition of a majority stake in Pakistan-based Engro Foods for US$509m in July.

A managing director at an Asia-Pacific based private equity firm said, “All of the major, global companies within the consumer-sector are turning to the APAC market for necessary growth and development of their products.” He added that this will be a long-term trend due to factors such as the growing middle class and rise in disposable income within the APAC region.

What will be the main drivers of inbound M&A activity to the Asia-Pacific region over the next year?

(Select top two)

More than two-thirds of our respondents (68%) predicted that a desire to expand into new geographies will be one of the main driving forces for making inbound deals. A majority (52%) also said that growth of consumer spending in APAC countries will be a major catalyst for inbound M&A.

Many of our respondents said they believe opportunistic firms will look to expand into the rapidly growing markets of Asia, leading to meaningful gains for their businesses. This sentiment is largely spurred by a booming working-age population, a strengthening middle class and higher disposable income amongst emerging markets in the region. For instance, India and China alone contain approximately 39% of the world’s working-age population (ages 15 - 64).

36.0%Technology

56.0%Consumer

32.0%Pharma, Medical & Biotech

4.0%Real Estate

28.0%Industrials & Chemicals

24.0%Energy, Mining & Utilities

16.0%Financial Services

Q1

Q2

Q1

Private equity purchases

Low cost of deal financing

Growth of consumerspending in APAC countries

Desire to expand intonew geographies

Acquisitions of Asiantechnology firms 28.0%

68.0%

52.0%

36.0%

12.0%

Q2

5

“APAC is a huge and diversified market where the domestic demand is evolving, giving a lot of opportunities for foreign firms to expand their products and services in new geographies,” said a US-based private equity partner. He added that this is due to “significant growth in consumer spending in this region, resulting in a high likelihood of increased profits.”

What will be the main barriers/challenges to inbound M&A to Asia over the next year?

(Select top two)

Even though most of our respondents agreed that inbound M&A into the Asia-Pacific region would be favorable for many foreign firms, the barriers that have resulted in sluggish inbound activity could have an outsized impact on total dealflow. Roughly two-thirds of our respondents (68%) think that regulatory issues such as anti-corruption laws will be a significant hurdle for inbound dealmaking, while 44% said a lack of understanding of local markets will suppress deal appetite as well.

Although regulatory issues have influenced inbound M&A for many countries in Asia, they have most notably affected China in recent years. Four different Chinese government agencies can be involved in approving a deal, including the Ministry of Commerce, whose complex review process can last as long as nine months. The CFO at one Japanese corporate highlighted the relevance of this issue, saying that “regulatory issues have only grown in the last few years, especially the anti-corruption laws that have continued to expand and develop across the entire Asia-Pacific region.”

In some cases, regulatory issues and inadequate understanding of local markets go hand in hand. As a 2015 Boston Consulting Group report explained about doing deals in China, some well-established concepts in the country go over the heads of foreign dealmakers: “Westerners too often misinterpret the impact of the Chinese cultural phenomenon of guanxi, which they misconstrue as a murky system of ‘connections’ or ‘relationships,’ on the regulatory approval process. Guanxi is actually rooted in empathy – the concern for someone else’s interests when taking an action of one’s own.”

Q3

68% OF PARTICIPANTS SEE

REGULATORY CONCERNS AS A SIGNIFICANT HURDLE FOR FUTURE INBOUND APAC DEALMAKING

68.0%

Regulatory issues (e.g., anti-corruption laws)

44.0%

Lack of understandingof local/regional markets

36.0%

Shortage of appropriatestrategic targets

24.0%

Sluggish growth in Chinaand across the region

28.0%

Geopolitical + macroeconomic uncertainty (e.g., due to Brexitand the US election)

Q3

VENUE® Market Spotlight: Asian Cross-border M&A

Which sectors will see the most outbound M&A activity from the Asia-Pacific region in the coming

12 months? (Select top two)

Respondents were almost evenly split in their opinions regarding which sectors will see the most outbound M&A from the Asia-Pacific region in the coming 12 months. Nearly half of respondents (48%) said the technology sector will see sizable activity, while 44% said industrials and chemicals would be active and another 44% said energy, mining and utilities would. Only 4% said the pharmaceutical sector would receive much attention in terms of outbound M&A from Asia.

Chinese buyers have been particularly active in outbound dealmaking, especially for US targets. Total deal value for the first eight months of 2016 shot up to US$38.1bn, compared to just US$11.7bn for all of 2015. In the technology sector, one megadeal in this category saw China-based Tianjin Tianhai Investment Co. pay US$6bn for US-based Ingram Micro.

According to one China-based CFO, “A surge of outbound dealflow from this region is the result of APAC companies’ desire to acquire new technologies to fuel growth and customer satisfaction.”

What will be the main drivers of outbound M&A activity from the Asia-Pacific region over the next

year? (Select top two)

An overwhelming majority (84%) of our respondents said the main drivers of outbound activity from Asia-Pacific over the next year will be a desire to expand into new territories, while more than half (60%) of respondents said a desire to acquire strategic technology will be a major driver as well.

Few respondents cited financial factors, such as advantageous exchange rates or the low cost of deal financing, as main drivers for outbound dealmaking. Indeed, in the case of deals such as SoftBank’s US$30.1bn acquisition of UK-based ARM Holdings, Softbank’s CEO made it clear that the decision was based on a desire to acquire new technologies – particularly those relevant to the “internet of things” – rather than a desire to take advantage of the weakened pound.

Q4

Q5

Pharmaceuticals

Technology

Real Estate

Media

Industrials& Chemicals

Financial Services

Energy, Mining& Utilities

Consumer

44.0%

20.0%

44.0%

12.0%

12.0%

16.0%

48.0%

4.0%

Q4

Low cost ofdeal financing

Desire to expand intonew geographies

Chinese purchasesof US assets

Advantageousexchange rates

Acquisitions ofstrategic technology 60.0%

16.0%

20.0%

84.0%

20.0%

Q5

7

What will be the main challenges to outbound M&A from the Asia-Pacific region over the next year?

(Select top two)

More than half our respondents (56%) said geopolitical and macroeconomic uncertainty will be one of the main challenges affecting outbound dealmaking from the Asia-Pacific region over the next 12 months, indicating that Brexit and the uncertain US election are on acquirers’ minds. Similarly, 52% of respondents said that sluggish economic growth in Western nations will be a deterrent of outbound M&A from the Asia-Pacific region.

These results are representative of recent reports stating that Chinese outbound M&A into the UK, for instance, will slow down in the coming months due to Brexit. According to a recent Deloitte report, Chinese firms may be reluctant to move forward with deals for fear that the UK is slipping into a recession.

The uncertainty of macroeconomic variables at play “makes it difficult to accurately perform due diligence in Western countries,” said a managing director of a private equity firm based in Hong Kong. He added that many companies will wait until conditions have stabilized before moving forward with M&A deals.

What will happen to Asia-Pacific cross-border private equity activity (both inbound and outbound)

over the next 12 months?

Despite geopolitical and macroeconomic uncertainties, 52% of our respondents said they think cross-border private equity activity to and from Asia will increase somewhat in the next year, with another 24% predicting that it will remain the same. Roughly 16% of respondents foresee a decrease, while 8% believe activity will actually increase significantly.

The majority’s belief in a slight uptick in cross-border activity is underpinned by current deals underway, such as Blackstone Group’s plan to sell Strategic Hotels & Resorts to China-based Anbang Insurance Group for US$6.5bn and Baring Private Equity Asia’s role in the acquisition of Thomson Reuters’ intellectual property and science business for US$3.55bn.

Q6

Q7

56.0%

Geopolitical + macroeconomic uncertainty (e.g., due toBrexit and the US election)

40.0%Regulatory issues(e.g., CFIUS review)

52%Sluggish economic growthin Western nations

24%Shortage of appropriatestrategic targets

28.0%High valuations

Q6

Decrease somewhat

Remain the same

Increase somewhat

Increase significantly 8.0%

52.0%

24.0%

16.0%

Q7

VENUE® Market Spotlight: Asian Cross-border M&A

Venue Data Room

NOTABLE DEALS IN THE ROOM

Venue

®®® data room: A special report

For more information:Please contact your Donnelley Financial Solutions Sales Rep.Call 1.888.773.8379

Or visit www.venue.dfsco.comVenue demo (audio enabled):Venue.dfsco.com/Demo Deals. Done. Simple.

888.773.8379www.dfsco.comwww.venue.dfsco.comCopyright © 1995-2016 Donnelley Financial, LLC.

All rights reserved.

Corporate Headquarters 35 West Wacker Drive Chicago, IL 60601U.S.A.

Medical: Pharmaceuticals

ABBVIE

Acquires

STEMCENTRX

$5.8 B

APRIL 28, 2016

Medical

HELLMAN &

FRIEDMAN

Acquires

MULTIPLAN

$7.5 B

JUNE 7, 2016

Computer software; Telecom: Hardware

VERIZON

Acquires

FLEETMATICS

$2.4 B

AUGUST 1, 2016

Computer software; Services (other)

KION

Acquires

DEMATIC

$2.1 B

JUNE 21, 2016

Automotive: Computer Software

MICROSOFT

andAMAZON

Acquire minority holdings in

HERE

$2.85 B

APRIL 6, 2016

Transportation: Airline

ALASKA AIR

Acquires

VIRGIN AMERICA

$4 B

APRIL 4, 2016

Computer software

NTT DATA

Acquires

DELL SERVICES

$3.1 B

MARCH 28, 2016

Chemicals & materials

SHERWIN-WILLIAMS

Acquires

VALSPAR

$11.3 B

MARCH 20, 2016

Consumer: Retail

LOWE’S

Acquires

RONA

$2.3 B

FEBRUARY 3, 2016

11

ABOUT DONNELLEYFINANCIAL SOLUTIONS

About Venue

design that allow you to easily organize, manage, share and track all of your

you can manage who has access to your data room, which documents they see, and how they can interact with those documents.

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Donnelley Financial Solutions (NYSE: DFIN) provides software and services that enable clients to communicate with confidence in a complex regulatory environment. With 3,500 employees in 61 locations across 18 countries, we provide thousands of clients globally with innovative tools for content creation, management and distribution, as well as data analytics and multi-lingual translations services. Leveraging advanced technology, deep-domain expertise and 24/7 support, we deliver cost-effective solutions to meet the evolving needs of our clients.

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Donnelley Financial Solutions | www.dfsco.com

NOTABLE DEALS IN THE ROOM

Venue

®®® data room: A special report

For more information:Please contact your Donnelley Financial Solutions Sales Rep.Call 1.888.773.8379

Or visit www.venue.dfsco.comVenue demo (audio enabled):Venue.dfsco.com/Demo Deals. Done. Simple.

888.773.8379www.dfsco.comwww.venue.dfsco.comCopyright © 1995-2016 Donnelley Financial, LLC.

All rights reserved.

Corporate Headquarters 35 West Wacker Drive Chicago, IL 60601U.S.A.

Medical: Pharmaceuticals

ABBVIE

Acquires

STEMCENTRX

$5.8 B

APRIL 28, 2016

Medical

HELLMAN &

FRIEDMAN

Acquires

MULTIPLAN

$7.5 B

JUNE 7, 2016

Computer software; Telecom: Hardware

VERIZON

Acquires

FLEETMATICS

$2.4 B

AUGUST 1, 2016

Computer software; Services (other)

KION

Acquires

DEMATIC

$2.1 B

JUNE 21, 2016

Automotive: Computer Software

MICROSOFT

andAMAZON

Acquire minority holdings in

HERE

$2.85 B

APRIL 6, 2016

Transportation: Airline

ALASKA AIR

Acquires

VIRGIN AMERICA

$4 B

APRIL 4, 2016

Computer software

NTT DATA

Acquires

DELL SERVICES

$3.1 B

MARCH 28, 2016

Chemicals & materials

SHERWIN-WILLIAMS

Acquires

VALSPAR

$11.3 B

MARCH 20, 2016

Consumer: Retail

LOWE’S

Acquires

RONA

$2.3 B

FEBRUARY 3, 2016

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