COVID-19: Opportunities in the Asian diagnostics sector

While there has been broad discussion on how businesses and markets have responded to the coronavirus outbreak and how they will adapt to a post COVID-19 world, arguably, no industry has received as much attention as clinical diagnostics. With the heightened focus on testing, terms such as antibody test and nasopharyngeal swap have jumped from medical journals to the front pages of newspapers the world over.

Thanks to previous experience with SARS, Asian IVD companies in many cases have led innovation in combating SARS-CoV-2. Regulators worldwide are closely studying the rapid response and mobilization of testing resources seen in China and Korea at the outset of the pandemic. However, even with the situation stabilizing in East Asia, companies in the region continue to innovate – developing more rapid point-of-care tests and antibody testing platforms, not to mention the urgent research into a possible vaccine being led by companies like CanSino and Shenzhen Geno-immune in China, Bharat Biotech in India, SK Biopharma in South Korea, and Takeda in Japan, to name only a few examples.

While the response to the pandemic has lifted the valuations of diagnostic tools and technologies companies globally, Asian companies have been trading, on average, at over 30x trailing EBITDA, led primarily by premium valuations achieved by Chinese diagnostic tools companies. We expect the spike in valuations will create opportunities in the space and accelerate consolidation efforts in the region, especially in China where the IVD market is less concentrated and the rise of import substitution in the diagnostic products space has attracted increased investment from both healthcare companies and firms in other industries looking to capitalize on the trend.

While year-to-date M&A activity has been muted across all industries, BDA and our partners William Blair continue to participate in deal activity in the diagnostics space, including the recently announced sale of FountainVest’s stake in Chinese IVD business Shanghai Kehua Bio-engineering in China and the sales of Stratos Genomics to Roche and of Exalenz to Meridian Biosciences in the US and Israel, respectively. We have also seen significant capital markets activity in the diagnostic tools and technology space so far this year.

In many ways, the coronavirus pandemic has accelerated a growth trend already taking place in Asia. Thanks to a focus on preventative care to reduce healthcare costs and the increasing prevalence of diagnostic testing, the Asian IVD industry had been poised to achieve double-digit growth over the next five years, even before the first cases of COVID-19 were reported.

While it could be argued that the impact from COVID-19 on the diagnostics space will be short-term, BDA has seen an interesting dynamic emerge where demand for more routine test kits, such as flu tests, have fallen due to COVID-19. We expect this will be temporary and not dampen mid-term demand. If anything, the pandemic has triggered increased spending on development that will spur further innovation for years to come.


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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 24 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 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 authorised 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

The COVID-19 pandemic has already caused significant damage to the global economy. All markets and sectors have been affected. Asian countries are working with some success to revive their economies, and to begin to loosen lockdowns across the region, although we have seen numerous setbacks.

The pattern today feels like two steps forward, one step back.  

Technology and the practices developed in past pandemics have enabled governments to track potential infection cases, trace their close contacts, and quarantine all affected individuals to stop the virus from spreading in the community. Singapore’s contact tracing application, TraceTogether, uses Bluetooth technology, as does Australia’s COVIDSafe app. South Korea’s drive-through testing centres have enabled testing for large sections of the population. In China, the government has used a combination of QR codes, colour-coding, and the ubiquitous Alipay and WeChat apps to track and permit healthy travellers.  

Several Asian countries, including China and South Korea, have experienced an uptick in cases sometime after restrictions were eased. In several instances, authorities have re-imposed measures to restrict interactions between citizens, to fight secondary spread of the virus.

For most of the past month, China has reported very small numbers of daily new cases, most of which were “imported”. In recent days, the Chinese government has found new local clusters in cities including Wuhan and Shulan. The global press has been sceptical as to the true number of China cases, but the country has taken dramatic and extensive steps to regulate and monitor all its citizens so businesses can largely return to work. Businesspeople are now able to travel around the country via cars, trains, buses, aeroplanes, etc.

South Korea managed to lower the number of new cases without fully locking down its economy. Instead, the South Korean government responded quickly to ramp up testing capacity and aggressively trace and isolate every potential case.

In Japan, Prime Minister Shinzo Abe has extended the nationwide state of emergency to 31st May. Japan’s Economy Minister Yasutoshi Nishimura has said the declaration will be lifted in many regions outside Tokyo, this week.

Singapore’s citizens will soon be able to get a haircut and visit bakeries, as the government loosens restrictions slightly. Despite an upsurge in cases due to an outbreak among foreign construction workers in crowded dormitories, transmission in the local community has dropped. Singapore has reported 26,000 infections, the most in Asia, after China, India, Pakistan and Qatar. But it has a low fatality rate, with only 21 deaths.

As of 12th May, Vietnam has, according to official statistics, still suffered no deaths from the virus, and has limited total infections to just 312, despite its shared border with China, and its role as a popular regional holiday destination. Vietnam has managed a rigorous pandemic control strategy including extensive structures of control and tracking via mobile phones.

Despite rising numbers of COVID-19 cases, both India and Pakistan are loosening their strict lockdowns, hoping that deaths will remain low and their hospitals will be able to cope with the serious cases. The surprisingly low level of South Asian deaths so far, may signal a milder pattern to the disease outbreak, which has convinced authorities the economic harm of extended lockdown is not justified when set alongside the apparently manageable health risks. Official statistics in both countries show a relatively low level of infections to date, but analysts suggest that a growing number of infections may be lurking undiagnosed.




We see many bright spots in key BDA markets.

Financial sponsors have been resilient and quick to act. Initially they performed triage on their existing portfolios, but already they are beginning to explore new growth opportunities including looking at prospective acquisitions. Global sponsors have been particularly aggressive in Japan, with local government support. Notably, Bain Capital has acquired Showa Aircraft Industry and Nichii Gakkan. Private equity firms are increasingly looking at take-privates and PIPE transactions.

As in all downturns, we see the strongest and best capitalised, most differentiated players, as benefitting and often growing market share aggressively. Tech-enabled businesses, and those which sell online, have become markedly more successful.

We see some price dislocation, slowing the progress of deals: sellers do not want to accept a significantly lower price, but buyers are looking for bargains. Realism is seeping through, and the most sophisticated players are looking beyond the crisis. Stock markets have bounced to some extent off their low.

We are seeing some distressed seller activity, and evidence of business groups looking to sell certain assets via carve-outs to generate cash or refinance existing debt facilities.

Life goes on, for now, in the new abnormal.

Notwithstanding lockdowns and social distancing, BDA is succeeding in helping clients to close transactions. Buyers are hiring third parties to carry out site visits, to be their eyes on the ground, when the buyer is unable to travel. Management presentations are being done virtually as video conferences with Microsoft Teams and Zoom. BDA is proud to have advised on transactions involving India, Vietnam, Thailand, China, Germany and the US in the last two months:

We have been monitoring each sector and geography, working to provide timely insights to help our clients understand and weather the storm.
 
We have published the following reports which you may find useful:


BDA has a track record of providing high-quality M&A advice, over 24 years. We have built scale, focus and connectivity between sellers and buyers across Asia, and worldwide. We will continue providing premium, Asia-related advice to clients globally, to achieve the best transaction outcomes – including walking away from deals which don’t make sense.

We are available at short notice to discuss what we are seeing, and how we can assist with your strategies and potential transactions.

We trust that you and your families are staying safe and healthy. We are operating well, across all our offices, and from our homes. We are confident we are well placed to help our clients achieve their goals during the rest of this year and beyond.

Please let us, or our senior colleagues, know if we can help you in any way.


Euan Rellie, Charlie Maynard, Andrew Huntley and Paul DiGiacomo

Senior Managing Directors
BDA Partners



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 24 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 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 authorised 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

In the weeks following India’s lockdown to contain the spread of novel coronavirus (COVID-19), the chemicals sector has witnessed considerable short term volatility but is well positioned to benefit in the near future, given the decline in prices of key feedstocks, and COVID-19 related manufacturing shifts away from China. We have examined both the short-term and long-term factors shaping this sector in India, and where future opportunity may lie for corporates, private equity and private owners of business.


The BDA Chemicals sector team would like to share our latest findings with you.


Executive Summary

Overall, we continue to see M&A activity such as growth capital and distress sales to continue in the short-term while consolidation will resume once the impact of the virus can be translated to the financials and future of the businesses.


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Contact us


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 24 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 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 authorised 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

Since our last report, COVID-19 impact on the Asian consumer sector, in February 2020, the epidemic has become a global pandemic. Extended lockdowns and stringent social distancing measures have upended consumer behavior and lifestyles, globally.

What new consumer habits are developing, and which are likely to become long term themes? How are businesses around the world responding to the crisis, to position themselves as relevant in the longer terms? What deal-making and private equity activity do we see, in Asia and across our markets?

The BDA Consumer & Retail team is pleased to share our update:


Coronavirus has changed consumer behavior

Extended lockdowns and stringent social distancing measures have upended consumers’ behavior and lifestyles, globally.  Even before COVID-19, consumers were already rapidly changing and evolving their purchasing patterns. The pandemic has accelerated this process, and brought about some dramatic new habits.

Many of these new habits will stay, potentially for the long term, even when the pandemic is over.

Consumers have been stockpiling supplies of not only staple grocery items, but also healthcare products and medicines

Non-essential items such as clothing, jewelry and beauty have seen significant declines.

The accelerating growth in online shopping will spur development in adjacent areas, notably digital payment and last-mile logistics. Paidy, a Japanese fintech company facilitating online payment without credit cards, raised US$48m in a Series C extension from Itochu. Ninja Van, a Singapore-based last-mile logistics provider has raised US$124m in Series D funding.


Focusing on self-care and home improvement

As the lockdown continues, there will be an increased focus on a broader concept of wellness – cleaner ingredients, organic and natural food, physical fitness, and mental rebalancing.

Online demand for cooking and mental health content has grown rapidly as consumers are developing an expansive view of wellness. Online searches for cooking and baking-related terms are surging. As consumers become more mindful of their food choices, the focus is increasingly on less processed food with more natural ingredients including organic food.

Yale’s happiness course, “The Science of Well-Being”, has attracted 1.5 million subscribers since mid-March, compared to 500,000 over the last two years. Meditation apps have seen a spike in downloads as people struggle with anxiety. Moshi, a sleep and mindfulness app for children, has raised US$12m in Series B funding.

With travel and social events curbed, consumption amongst millennials is shifting back from experiences to purchases, centering around the home.

The broader trend will reflect higher expenditure on home furnishings, kitchenware and appliances. Work-from-home arrangements may also lead to a permanent shift in workplace format, and change how consumers design and use their home space.


Virtual classes and home fitness regime

Fitness clubs and gyms are, for now, closed in most countries. Consumers are turning to virtual fitness classes and investing significantly into home fitness gear, which will fundamentally shift and define the fitness sector in the longer term.

Adidas registered record sales of yoga mats in Q1 2020. Aibi, a Singapore-based producer of treadmills and elliptical trainers, saw sales increase by up to 300%. Silver Lake has invested in Equinox, the majority shareholder of SoulCycle, to help build up its digital platform and to introduce a SoulCycle at-home use bike to tap into this trend.

To acquire and retain users, gyms and fitness instructors are going online, first offering free workout content, and gradually exploring ways to monetize remote fitness experiences. Mirror, a technology that streams fitness classes, has reported a rush of new demand.

Personal trainers are finding ways to reach their existing clients through virtual classes on Teams and Zoom. Other platforms have dropped subscription fees. Nike is offering its NTC Premium service, a platform for workout videos streaming and training programs, for free.


Changing business behavior to cope with COVID-19

To keep up with the drastic shifts in consumption behavior, and in anticipation of the future consumer, companies have taken significant measures to boost revenue, manage costs and improve operational efficiencies.

Food service companies have accelerated their shift towards online delivery and heavily promoted take-out options. Putien, a Singapore-based Chinese restaurant, launched a Takeaways Specials promotion, offering their most popular dishes at reduced prices – unheard of for a one-star Michelin restaurant.

Emerging brands across the world, from activewear by Lorna Jane and Alo Yoga, to bedding products by Brooklinen, are offering aggressive discounts to boost revenue. Others, including Apple, Sephora and demi-fine jewelry brand, Monica Vinader, are extending free return periods.

Retailers are demanding rent reductions. Related Companies, a major US real estate developer and owner, reported that “only about 25%” of its retail tenants paid rent in March.

As companies navigate this unprecedented period of difficulty, market participants are exploring how to optimize their supply chains and cost base. Some will undoubtedly emerge stronger while others will falter and eventually go bust.


How soon will consumers come back post COVID-19 and which companies will thrive

Consumer spending will rebound post-coronavirus – the question is how fast and how far. We are already seeing evidence of pent-up demand and delayed consumer discretionary spending. 

When Hermès reopened its second largest Guangzhou flagship store, it generated US$2.7m, the single highest daily revenue for a single store in China, offering a tantalizing glimpse into one possible form the economic recovery might take.

Wealthy customers bought non-COVID essentials: tableware, shoes, furniture and leather goods. Some spent hundreds of thousands of dollars on crocodile leather goods – suggesting that the pandemic has left some high-end customers ready to engage in conspicuous retail therapy.

Big corporates with sizeable cash reserves and access to extensive cheap capital are best placed to respond to crises. Their strong balance sheets will help them navigate a prolonged global disruption and gain market share.

Small and Medium Enterprises (SMEs) with limited cash balances are more vulnerable. Although interest rates are low, smaller companies are struggling to access financing as risk aversion sets in with the banking community. Some are desperately looking for rescue funding to stay afloat; others are letting their employees go.


Deal-making and private equity during COVID-19

Travel restrictions and local lockdowns have significantly slowed down the M&A market.

Most companies have redirected their management teams to focus on preserving cash rather than pursuing acquisitions. Executives are taking voluntary pay-cuts, furloughing or laying off staff.

Executives are also being asked to provide updated business plans, re-run budgets and assess liquidity needs, factoring a U-shaped rather than V-shaped recovery.

Mid-market private equity players are being more cautious for now, tending to their own portfolio companies, drawing down credit lines, pruning costs, and preparing for a longer period of subdued trading.

However, with the private equity industry sitting on a  record cash pile of US$2.5tn across all fund types, according to Bain & Co., some big players are making counter-intuitive, counter-cyclical bets. They are actively seeking deals across the industries hard-hit by COVID-19, such as the travel, entertainment and energy sectors. Silver Lake and Sixth Street Partners invested US$1bn Airbnb in April, as an example.

Some western private equity firms are being opportunistic and have shifted their focus towards taking advantage of distressed opportunities and making PIPE investments, into companies who need cash urgently. Silver Lake, Advent, KKR and Apollo, for instance, see the chance to acquire assets at much cheaper prices than last year. They will move opportunistically and aggressively.

While western players have started to move forward with more confidence, we expect Asian private equity players to follow quickly.

True Capital, a European consumer private equity player, has taken a 50% stake in fashion brand Hush, a UK e-commerce brand with US$75m revenues, focused on casual womenswear, including pajamas and loungewear. Hush claims an agile, digital-first business model, loyal customer base and relevant, contemporary product range. The CEO of True Capital, Matt Truman said: “We think highly profitable, predominantly direct to consumer brands such as Hush are the ones that will emerge in best shape from this current crisis… we’re very much open for business and excited about the opportunity ahead of us.”

We are also seeing global rescue investment in the most troubled sectors. 

Engage Brands, a US operator of Pizza Hut, Checkers & Rally’s franchises, has acquired restaurant chain Boston Market from Sun Capital Partners. The restaurant industry is facing extreme challenges. Social distancing is restricting restaurants to take-out and delivery offerings only, and chains have seen a drastic drop in sales. “Engage Brands brings an enthusiastic, experienced, and successful ownership group to Boston Market, as well as access to resources that we need to continue to operate our business in this challenging environment,” said Eric Wyatt, CEO of Boston Market.

Steiner Leisure, an L Catterton affiliate, alongside funds advised by Neuberger Berman, has invested US$75m to support the management of OneSpaWorld Holdings Limited (NASDAQ: OSW), a global provider of health and wellness services and products on-board cruise ships and in premium destination resorts around the world.

L Catterton has also made a significant investment in ETVOS, one of Japan’s leading natural cosmetics brands, to bolster growth by expanding store-footprint and enhancing customer experience. Founded in Osaka in 2007, ETVOS provides 100% made-in-Japan mineral-based makeup products.

These trends will come to Asia – though Asian private equities are remaining more conservative for now.


BDA still closing deals

Notwithstanding the pandemic, BDA continues to help clients close transactions, including:

-The sale of Sichuan Huiji Food, a leading branded, better-for-you snack company in China, to Grass Green and New Hope Group

-The sale of Thinh Phat Cables and Dong Viet Non-Ferrous & Plastic to Stark Corporation PCL of Thailand

-The sale by Henkel of its Asian electronic cleaning chemicals business to Nippon Kayaku, a Japanese specialty chemicals company

-The acquisition by Rich Foods of the outstanding 50% equity in its Indian JV, Rich Graviss, a market-leading bakery ingredients business

We believe transaction activity will bounce back once the virus is contained. Opportunistic investors, particularly private equity firms who are holding record dry powder, are eager to find deals at the right valuation.

Investors will favor recession-resilient and defensive industries that will withstand the market downturn.

Sectors such as technology, healthcare, business services, essential consumer supplies, EdTech, and O2O businesses will receive increased attention

Deal valuations will be somewhat subdued for the coming months. The public markets have seen a lot of volatility as a result of uncertainty and panic selling induced by COVID-19.   Some major stock markets dropped by more than 20%, signaling a potential adjustment to company valuations, at least in the short term.

We expect to see more domestic rather than cross-border deals done in the near-term, until travel bans and prolonged lockdowns in major cities are lifted.


Download the full report


Contact the BDA Consumer & Retail team


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 24 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 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 authorised 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

In the first trading week after the outbreak of the novel coronavirus (COVID-19), health sector performance in China’s capital market was remarkably strong. We look here at long-term impacts on the sector in China, and where the M&A and Private Equity opportunities may lie.

The BDA global Health Sector team has investigated these topics and would like to share our latest findings with you in our latest report.


Executive Summary:


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Contact BDA Healthcare team, China


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 24 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 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 authorised 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

Since the coronavirus (COVID-19) outbreak in December 2019, it’s become evident that the disruption to the economy will impact not just China but the rest of the world. Obviously, there is still a lot of uncertainty about what will happen –but the effects are already dramatic. Major cities are locked down. A mass quarantine of tens of millions of people. Millions are stuck and banned from travelling in and out of China. Thousands have died.

Businesses are taking drastic measures. Thousands of Chinese factories are yet to reopen. Tens of millions of professionals are working from home or on rotation. Students are on extended breaks.

Global airlines have mostly suspended flights to China. Travel and visa restrictions have been established in almost 100 countries.

The global supply chain has been disrupted. Countless businesses have been impacted by the outbreak of the coronavirus.

Not surprisingly, demand for most discretionary goods has dropped dramatically across the region. Tourism, hotels and airlines are decimated. Retail stores and restaurants are in deep trouble. Consumer staples such as groceries, rice, instant food and toilet paper have remained resilient. The epidemic has helped supermarkets and e-stores attract new online customers without extensive marketing and promotional efforts.

Some sectors might benefit from the virus outbreak –but not most. Anything that is related to digital, direct-to-consumer, healthcare: online supermarket, food delivery, digital home entertainment, online games, online education, healthy foods, consumer health and drugs, will benefit.

Surgical masks, alcohol sanitizers and other hygiene products are the most obvious beneficiaries of the coronavirus disruption.

We think the coronavirus outbreak will accelerate the shift towards online shopping and entertainment, boosting online segments. The new O2O, ecommerce delivery model fits well with consumer needs when they are asked to stay at home. The new habits people pick up in the next few months will last, in many cases, forever.

We saw US$40bn in global lost productivity due to SARS in 2003 and US$55bn during the 2009 H1N1 swine flu pandemic, both of which involved China. Those numbers could be dwarfed by this new virus –which could delay growth of hundreds of billions of dollars.

Global growth will resume as long as the coronavirus doesn’t last too long. Three lost months will be a big hit. Six lost months could mean some countries tip into recession. It is too early to assess how big the impact is, but we are impressed by a sense of calm and resilience by financial players.

Q1 profitability will be negatively impacted globally. M&A deals will slow down dramatically in the next couple of months. Valuations may drop in the short term but should bounce back sharply. Post-virus, there will be pent up demand, from delayed consumer discretionary spending, and delayed spending on consumer durables. We expect deals to rebound once the virus is contained. In the meantime, there will be good buying opportunities in China and beyond.


Download the full report


Contact the BDA Consumer & Retail team


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 24 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 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 authorised 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