BDA Insights | 2024

Since the start of 2024, we have seen a strong upturn in M&A after a challenging year. BDA’s pipeline and sector expertise have continued to grow. We have published many insight pieces from our sector heads within Consumer & Retail, Health and Technology this year. Please join our mailing list to read our latest insights and reach out to BDA Partners for a discussion regarding specific M&A opportunities. 

The beauty sector is glowing and glowing in Asia

North Asian countries already comprise the world’s largest markets for beauty and personal care products. China, Korea and Japan together represent 35% of the global market, with above average growth. China skyrocketed to become the industry leader in this region, but has witnessed a troubling market hangover in the last 12 months.

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Asia GP-led secondaries: A new normal for liquidity? 

GP-led secondaries have become a more attractive, alternative, path to liquidity amid a challenging exit environment for sponsors during the past two years. While APAC markets still lag behind their Western counterparts in utilising this type of transaction, recent completed transactions have been encouraging.

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Say hello to the new Maharajahs: India is the new luxury hub

For a decade, China has been the engine for global luxury growth. China now accounts for 25% of global luxury spending, but this year, China’s growth has slowed to a trickle.

India today is a much smaller luxury market, representing 5% of global luxury spend, but it’s suddenly seeing explosive growth.

GDP growth, 8.2% in 2023, lit the touch paper. Next: the fireworks.

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Software in Asia

Underpinned by continued digitalisation, rapid adoption of localised, cloud-native mission-critical Software, attractive demographics and other market tailwinds, Asian Software is set to outpace Global Software growth, reaching ~20% share of the Global Software market by 2028.

In our latest insight piece, we summarise our key observations on the Asian Software landscape.

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China Healthcare M&A outlook for 2024

In China’s dynamic healthcare market, M&A activities are booming due to an ageing population and increasing consumer health demands. The sector is seeing heavy domestic investments from Chinese firms and Government funds.

In our latest Insights piece, we summarise the predicted outlook of China healthcare M&A for 2024.

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HealthTech sector landscape 
 

The HealthTech industry has seen substantial expansion in recent years, largely propelled by the widespread acceptance of digital healthcare services. 

In this Insights piece, we summarise the global HealthTech sector landscape.

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North Asian countries already comprise the world’s largest markets for beauty and personal care products. China, Korea and Japan together represent 35% of the global market, with above average growth. China skyrocketed to become the industry leader in this region, but has witnessed a troubling market hangover in the last 12 months.

Asia Pacific’s luxury beauty segment – especially China – face the challenge of justifying high prices to increasingly sophisticated and discerning consumers, against a backdrop of economic uncertainty and rising quality and quantity of brands at more accessible price points. At the same time, younger women – and men – are spending more each year.

North America makes up 25% of the global market, while Europe makes up 20%. And those regions are increasingly looking to Asia for innovation and growth.

Asian beauty brands have recovered from the pandemic, and are jostling to find new, compelling ways to connect with consumers. Beauty influencers and DTC brands are both driving and adapting to buyer preferences.

In the past, people would buy beauty brands landed in China purely because they were ‘Made in France’ or ‘Made in Switzerland’. Suddenly now, Asian consumers are rediscovering and appreciating their own rich cultural backgrounds and ancient beauty practices.

This swelling national pride has encouraged new Chinese domestic labels to engage in premium-isation, to offer more interesting propositions, drawing on home advantage. Compared to international peers, they have innovated faster and shown themselves to be adaptable and responsive to local consumer trends. International brands are finding it increasingly hard to grow market share, unless they speak to local preferences.

L’Oréal remains the leading global beauty products company, with US$40bn in global sales, double the size of second-place Unilever. Rounding out the top five are Estée Lauder, P&G and the Japanese giant: Shiseido. All of these are fighting to find growth across Asia, although Estée’s big bets on China have mostly misfired.

Once the domain of Western beauty leaders, the cosmetics industry across Asia is now booming, at least outside China, blending Eastern and Western elements. Rising disposable income and evolving lifestyles drive this growth, marking the beauty industry as one of the most radiant and lucrative consumer segments.

BDA’s latest Insight report shows that:

Younger emerging Western beauty leaders such as Kylie Cosmetics and Fenty Beauty are debuting in India, China and SE Asia to widen their consumer base.

The market is evolving and shifting fast. BDA is carefully monitoring these market dynamics, working on multiple transactions in the space. We’ve closed a number of exciting beauty transactions. We’re seeing strong dealflow. Let us know if we can help you.

GP-led secondaries have become a more attractive, alternative, path to liquidity amid a challenging exit environment for sponsors during the past two years. While APAC markets still lag behind their Western counterparts in terms of utilising this type of transaction, recent completed transactions have been encouraging.

In BDA’s latest insight piece, we share our key thoughts on the Asian GP-Led secondaries landscape:

Download the full report for more insights on the Asian GP-led secondaries

For a decade, China has been the engine for global luxury growth. China now accounts for 25% of global luxury spending, but this year, China’s growth has slowed to a trickle.

India today is a much smaller luxury market, representing 5% of global luxury spend, but it’s suddenly seeing explosive growth.

GDP growth, 8.2% in 2023, lit the touch paper. Next: the fireworks.

India is the fastest-growing major global economy. Political reform and a fast-growing, hyper-aspirational, young middle-class are driving India toward being the third largest consumer market globally.

The luxury and ultra-luxury sectors, across real estate, hospitality, apparel, accessories and automotive, are witnessing phenomenal growth. In BDA’s latest insight piece, we analyse the tremendous growth of luxury in India.

Download the full report for more insights on the luxury sector in India


About BDA Partners

BDA Partners is the global investment banking advisor for Asia. We are a premium provider of Asia-related advice to sophisticated clients globally, with over 25 years’ experience advising on cross-border M&A, capital raising, and financial restructuring. We provide global reach with our teams in New York and London, and true regional depth through our seven Asian offices in Mumbai, Singapore, Ho Chi Minh City, Hong Kong, Shanghai, Seoul and Tokyo. BDA has deep expertise in the Chemicals, Consumer & Retail, Health, Industrials, Services, Sustainability and Technology sectors. We work relentlessly to earn our clients’ trust by delivering insightful advice and outstanding outcomes.

BDA Partners has strategic partnerships with William Blair, a premier global investment banking business, and with DBJ (Development Bank of Japan), a Japanese Government-owned bank with US$150bn of assets.

US securities transactions are performed by BDA Partners’ affiliate, BDA Advisors Inc, a broker-dealer registered with the Securities and Exchange Commission (SEC). BDA Advisors Inc is a member of the Financial Industry Regulatory Authority (FINRA) and SIPC. In the UK, BDA Partners is authorized and regulated by the Financial Conduct Authority (FCA). In Hong Kong, BDA Partners (HK) Ltd is licensed and regulated by the Securities & Futures Commission (SFC) to conduct Type 1 and Type 4 regulated activities to professional investors. www.bdapartners.com  

Underpinned by continued digitalisation, rapid adoption of localised, cloud-native mission-critical Software, attractive demographics and other market tailwinds, Asian Software is set to outpace Global Software growth, reaching ~20% share of the Global Software market by 2028.

In our latest insight piece, we summarise our key observations on the Asian Software landscape:

Download the full report for more insights regarding Software in Asia. 

In China’s dynamic healthcare market, M&A activities are booming due to an ageing population and increasing consumer health demands. The sector is seeing heavy domestic investments from Chinese firms and Government funds. PE firms are seizing M&A opportunities amid capital raising challenges. Chinese companies are also eyeing cross-border M&A for tech-driven healthcare targets. The market outlook indicates industry reshuffles, rising demands for elderly care and consumer health, and flexible growth strategies by multinational firms.

Investment trends highlight a focus on resilient segments, surging investment in out-of-pocket payment sectors and Chinese firms expanding globally, particularly across SE Asia and the Middle East. European healthcare companies remain attractive for Chinese investors; licensing deals are on the rise, led by Chinese pharma firms. 

In our latest Insights piece, we summarise the predicted outlook of China healthcare M&A for 2024:

Download the full report for more Insights regarding the Chinese healthcare sector.


About BDA Partners

BDA Partners is the global investment banking advisor for Asia. We are a premium provider of Asia-related advice to sophisticated clients globally, with over 25 years’ experience advising on cross-border M&A, capital raising, and financial restructuring. We provide global reach with our teams in New York and London, and true regional depth through our seven Asian offices in Mumbai, Singapore, Ho Chi Minh City, Hong Kong, Shanghai, Seoul, and Tokyo. BDA has deep expertise in the Chemicals, Consumer & Retail, Health, Industrials, Services, Sustainability and Technology sectors. We work relentlessly to earn our clients’ trust by delivering insightful advice and outstanding outcomes.

BDA Partners has strategic partnerships with William Blair, a premier global investment banking business, and with DBJ (Development Bank of Japan), a Japanese Government-owned bank with US$150bn of assets. bdapartners.com

The HealthTech industry has seen substantial expansion in recent years, largely propelled by the widespread acceptance of digital healthcare services. The COVID-19 pandemic has brought about a shift in people’s attitudes, resulting in increased confidence in virtual healthcare delivery and a noticeable increase in participation by service providers, a trend that has been historically low. In our latest insight piece, we summarise the global HealthTech sector landscape.

Download the full report for more insights regarding the global HealthTech sector landscape


About BDA Partners

BDA Partners is the global investment banking advisor for Asia. We are a premium provider of Asia-related advice to sophisticated clients globally, with over 25 years’ experience advising on cross-border M&A, capital raising, and financial restructuring. We provide global reach with our teams in New York and London, and true regional depth through our seven Asian offices in Mumbai, Singapore, Ho Chi Minh City, Hong Kong, Shanghai, Seoul, and Tokyo. BDA has deep expertise in the Chemicals, Consumer & Retail, Health, Industrials, Services, Sustainability and Technology sectors. We work relentlessly to earn our clients’ trust by delivering insightful advice and outstanding outcomes.

BDA Partners has strategic partnerships with William Blair, a premier global investment banking business, and with DBJ (Development Bank of Japan), a Japanese Government-owned bank with US$150bn of assets. bdapartners.com

Jonathan Aiken, Partner and Head of London, discussed how a challenging economic environment is spurring the uptake of creative deal structures in a recent Ansarada Global Predictions Interview.

Which sectors, if any, do you believe will move to more aggressive growth strategies in their M&A programs, as opposed to more defensive dealmaking?

Within the mid-market, where we operate, investors strive for profitability and cashflow stability. In today’s complex investment environment, having high-revenue growth yet negative cashflow is completely out of vogue. Companies with a robust history of cashflow generation, for example the more resilient actors in the industrial and services sectors, have become good candidates for financing – or at least they don’t raise questions within investment committees or with their lenders. What one might think of as ‘traditional’ sector areas are outperforming as a result. Another example is healthcare, where macro trends such as aging populations and evolving healthcare needs in a post pandemic environment drive investment. The European luxury market has witnessed strong growth over the past few years. In France, some of the listed flagship leaders have seen phenomenal share price growth. While valuations have recently plateaued, the market boom reflects strong spending patterns of ultra-high-net-worth individuals from different regions across the globe – notably China and East Asia. Industries that have stronger cashflow and are more appealing to investors have been particularly resilient to the pressures within the global deal market. This is relevant to the mid-market, where M&A activity/volume has developed fairly well. It is at the higher end of the market where we have seen some multibillion-dollar transactions constrained due to a lack of availability of capital.

What do you think will be the biggest potential risks or challenges that dealmakers will have to contend with in 2024?

If you speak to dealmakers, the broad consensus would be the impact of unforeseen events. The global dealmaking community has lived through significant upheaval and sustained inflation. The challenges we are facing are significant and require nimble responses to seize new opportunities. Most practitioners believe that being able to react quickly to developing situations is a fundamental survival mechanism. On a micro level, it is worth sparing a thought for those managing their business through transactions, as often we hear of the difficulty in budgeting and forecasting while responding to supply chain disruption. Forecasting uncertainty and responding to market changes take up a disproportionate amount of business leaders’ time, and some do not have the necessary experience to build on. Some managers have not recently experienced significant inflation, for example, or needed to deploy price increases in their market – it is a novel experience for them. Even for leaders with 30 or 40 years of experience, the ability to respond and implement changes can be challenging. This dynamic ties into the broader dealmaking flow, as business leaders face the realization that their typical, traditional five-year business plan will not work in a challenging environment. Some businesses even have trouble forecasting growth over the next 12 months. This inherent uncertainty in the market creates a divergence between buyer and seller expectations – just one reason why dealmakers are experiencing difficulty closing transactions.

In your experience, how much more creative are dealmakers having to be, in terms of alternative deal structures, to bridge valuation gaps and get transactions over the line?

The market has come off a period of red-hot dealmaking in which the seller exercised an enormous amount of power, both in terms of the timing and terms of the transaction. During this period, we saw the dissipation, or disappearance in some cases, of dealmaking mechanisms such as earnouts. Now that dealmakers are operating in a much more uncertain environment, the balance of power has shifted, and some of these traditional mechanisms, including earnouts, are coming back to the fore to bridge the gap between buyer and seller expectations. We are also seeing a change in tack in relation to seller strategy. Whereas even in late 2022 financial sponsors would have run a competitive, fast-paced auction process, through 2023 owners of assets quietly and discreetly tested the market. This takes the form of entering into very specific conversations, seeking validation regarding buyer appetite, and even considering a bilateral process. This cautious, selective approach is very different to what we have seen in previous years. This period of relative quiet may present an interesting market environment for international buyers to consider deal opportunities. Many strategic buyers seeking cross-border opportunities have found it hard to compete against local sponsors within a competitive auction process when the market was booming. Now that valuations are more subdued, and the market is less pressured, it is an interesting time for international buyers. We will begin to see this trend play out, and it will be interesting to see how 2024 unfolds.

Amid a sea of economic and geopolitical challenges, are dealmakers dedicating more resources to due diligence to make sure potential deals get off on the right foot?

We are seeing a rise of vendor diligence across many different markets, even in markets that have not necessarily had a high level of experience in the process. In Asia, for example, a vendor will typically carry out financial, tax and other types of due diligence, whereas this was less common five years ago. ESG analysis is a newer area increasingly pursued. In the corporate carve-out space, a major cause of disagreement over value, and in many cases a potential roadblock in the deal, is within IT services, contracts and costing. In response to this challenge, we have seen a rise in thoughtful preparation of the IT diligence materials linked to IT resources for a dedicated asset and a focus on IT compliance. There is definitely more time and care spent on smoothing over potential issues. On the seller side, effective due diligence is part of de-risking a transaction and enhancing the probability of a deal crossing the line. We also see fairly rigorous and significant diligence analysis on the buyer side. Due to the shift in power between buyer and seller, the former can demand more concessions, and perhaps more price adjustments, by highlighting due diligence findings. It is in their interests to pursue the process vigorously.


About BDA Partners

BDA Partners is the global investment banking advisor for Asia. We are a premium provider of Asia-related advice to sophisticated clients globally, with over 25 years’ experience advising on cross-border M&A, capital raising, and financial restructuring. We provide global reach with our teams in New York and London, and true regional depth through our seven Asian offices in Mumbai, Singapore, Ho Chi Minh City, Hong Kong, Shanghai, Seoul, and Tokyo. BDA has deep expertise in the Chemicals, Consumer & Retail, Health, Industrials, Services, Sustainability and Technology sectors. We work relentlessly to earn our clients’ trust by delivering insightful advice and outstanding outcomes.

BDA Partners has strategic partnerships with William Blair, a premier global investment banking business, and with DBJ (Development Bank of Japan), a Japanese Government-owned bank with US$150bn of assets. bdapartners.com

BDA Partners Managing Partner Paul DiGiacomo was invited to be the keynote speaker at the VinaCapital Vietnam Investor Conference in Ho Chi Minh City in early October 2023. Having lived in Asia for 25 years and been active in Vietnam for the past 15 years, Paul has a unique perspective on the drivers and fundamentals of Vietnam’s investment landscape.

5 takeaways from the keynote speech

1. BDA is bullish on Vietnam

        • 15+ years active in the market 
        • Team of 10 M&A bankers
        • Investing opportunistically into early-stage opportunities through our partners’ fund 

2. Vietnam has attractive investment fundamentals, supported by:

3. External macroeconomic conditions that support Vietnam’s growth include:

4. Risks to Vietnam’s growth are:

5. The future is bright in Vietnam. By 2030 Vietnam will have:

BDA Partners has been active in Vietnam for over 15 years. We received our first investment banking mandate in 2007 and established an office in Ho Chi Minh in 2011. We now have a team of 10 bankers on the ground working across multiple sectors.

One of the most promising shifts for decarbonisation is the introduction of “Cooling-as-a-Service” or “CaaS”. With temperatures rising globally, temperature cooling has never been as important but comes with a significant environmental footprint. Outsourcing cooling to a third party directly incentivises these service providers to provide service as efficiently and environmentally friendly as possible and design a better, less carbon-intensive cooling infrastructure.

Download the full report for more insight regarding CaaS and its potential impact on decarbonisation


Sources: United Nations, Global Change Data Lab, IEA, The Economist


About BDA Partners

BDA Partners is the global investment banking advisor for Asia. We are a premium provider of Asia-related advice to sophisticated clients globally, with over 25 years’ experience advising on cross-border M&A, capital raising, and financial restructuring. We provide global reach with our teams in New York and London, and true regional depth through our seven Asian offices in Mumbai, Singapore, Ho Chi Minh City, Hong Kong, Shanghai, Seoul, and Tokyo. BDA has deep expertise in the Chemicals, Consumer & Retail, Health, Industrials, Services, Sustainability and Technology sectors. We work relentlessly to earn our clients’ trust by delivering insightful advice and outstanding outcomes.

BDA Partners has strategic partnerships with William Blair, a premier global investment banking business, and with DBJ (Development Bank of Japan), a Japanese Government-owned bank with US$150bn of assets. bdapartners.com