COVID-19 and M&A: Insights from Asia

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Key Takeaways

  • Leading indicators and conversations with strategic buyers, private equity groups and other colleagues throughout Asia suggest that Asian M&A markets—especially China—are beginning to recover from COVID-19.
  • In a shift from their previous preference for majority positions, Asian buyers are actively seeking minority positions in Western companies. That makes them good potential solutions for companies seeking investments and accelerated growth in Asia.
  • While the recovery timing for U.S. and European M&A markets remains difficult to predict, experience suggests that post-crisis market leaders will engage in M&A earlier than others.


The COVID-19 crisis is a fast-moving and unpredictable challenge, requiring all of us to work together in new ways, keep each other informed and adapt to daily changes in the environment. While Harris Williams is tightly focused on helping our clients navigate this unprecedented situation, we are also actively collecting and synthesizing market signals and integrating them into the guidance we provide.

Here, we share the latest perspectives from Daniel Wang, managing director leading the firm’s efforts in Asia; as well as Bob Baltimore and John Neuner, managing directors and co-heads of M&A. Our focus: learning what we can from the precedents being set in Asia’s M&A markets.

Green Shoots Amid the Risks

Wang notes that China’s massive, military-style nationwide shutdown and self-isolation appear to be paying off, pointing to the country’s dramatic drop in COVID-19 diagnoses. “People working in financial services in China are just starting to get back to work on a regular basis,” says Wang. “Major cities like Shanghai and Beijing are returning to normal, with tier 2 and 3 cities just starting to ramp back up.”

More positive news: Leading indicators are showing signs of recovery. For example, motor vehicle traffic, industrial production, real estate transactions, inter-city travel and auto sales all are either increasing or stable. Likewise, the China General Chamber of Commerce’s mid-March survey of the country’s top 500 manufacturers reported that 97% of factories have reopened, and 66% of employees have returned to work.1 Finally, full-year 2020 GDP forecasts remain positive for now, with Western banks projecting 2020 GDP growth in the 1–3% range, and Chinese banks estimating growth in the 4–5% range.2

The Chinese government has played an important role in this rebound, says Wang. Government agencies are supplying buses to bring migrant workers back to factories, providing hotel accommodations for 14-day quarantines for those workers and helping meet the transportation and logistics needs of private enterprises. Together, says Wang, these measures are intended to help the economy recover while keeping COVID-19 in check.

Regarding other countries in the Asia-Pacific region, Wang says Japan and Korea are experiencing the most severe impacts: “Neither country has completely contained the disease yet, and Japan’s troubles are compounded by the postponement of the Summer Olympics. In my opinion, these two markets will recover more slowly than others in the region.” In contrast, Wang says Singapore, Hong Kong and Taiwan appear to have suffered less of an impact from COVID-19, and should rebound more quickly.

At the same time, Wang notes that supply chains remain under pressure following a long period of factory closures. And, he says, the risk remains of a potential re-emergence of COVID-19 once workers return to factories and Chinese travelers return home, even though the government has been implementing strict protocols to manage this risk. In fact, as of March 24, confirmed cases had notably spiked due to travelers returning home to Singapore and Hong Kong from overseas.3

Despite these challenges, Wang says Chinese buyers, especially private equity groups, are actively seeking new opportunities, though their ideal deal size may have contracted somewhat. That interest has been heightened by equity markets that remain depressed, which makes deal valuations more attractive to buyers. “Asian investors have told me they have billions of dollars to deploy on cross-border deals, particularly within health and beauty, e-commerce, food and beverage, healthcare and business services,” Wang reports. “They are especially focused on businesses with strong growth opportunities in Asia, seeking to accelerate that growth through relationships, experience and liquidity.”

Also, says Wang, because Asian private equity groups generally use less leverage than Western investors, they are somewhat less exposed to debt-related risks, and many of their portfolio companies have begun to stabilize from the COVID impact. In general, that means they have both the liquidity and the time to consider new opportunities.

While long-term Asian interest in U.S. and European assets remains strong, Wang says travel restrictions and social distancing have made transacting very difficult, particularly conducting due diligence. He adds that current conditions are pushing some Asian private equity buyers to shift their tactics: “Some investors have told me they prefer to partner with other PEGs and strategic buyers on cross-border deals, versus going it alone. Others are reducing risk by looking at smaller deals than they would otherwise pursue, as well as minority positions. That could make Asian investors good options for U.S. and European companies seeking liquidity but also desiring to maintain majority ownership.” Wang also notes that Asian buyers can provide access to a large and recovering market.

Implications for U.S. Investors and Company Owners

Wang’s insights on Chinese investors have several implications for company owners and investors in the U.S. “For one thing, it’s encouraging to see signs of recovery and a long-term view on cross-border investment,” says Baltimore. “While the U.S. is clearly far behind China in terms of the COVID-19 curve, it’s helpful to be reminded of the light at the end of the tunnel and the strong fundamentals of the M&A marketplace, including the record levels of dry powder available for new opportunities.”

Neuner reinforces this sentiment: “A month or two ago, Asian private equity groups were working through challenges similar to what groups in the U.S. and Europe are facing now. It’s good to see the tide begin to turn in Asia.

“More tactically, we see Asian buyers as a solid option for high-quality U.S. and European companies in specific sectors, particularly those seeking liquidity from minority investors,” he says. “There’s also a record amount of dry powder among Asian PEGs, and fundamentally strong companies could have great interest from those buyers.”

Neuner is quick to add that all market participants need to take into account today’s considerable risks and uncertainties. For instance, while U.S. and European authorities have begun to enforce more rigorous social distancing and testing protocols, the timeliness and success of these measures remain to be seen.

In addition, cultural differences between Asia and both the U.S. and Europe could hamper the effectiveness of these containment measures. “Generally speaking, American and European governments have taken less draconian measures in locking down the movement of people,” says Wang. “That may make it difficult for Western governments to be as effective as China has been in containing COVID-19.”

Past Epidemics Have Limited Relevance

During past epidemics such as SARS, H1N1, H7N9, Ebola and MERS, there was little or no impact on U.S. M&A deal count.4 Furthermore, none of those epidemics triggered significant downturns. Likewise, while past epidemics have generally been followed by rapid, “V-shaped” recoveries, their limited economic impacts make comparisons less relevant.

“It’s too uncertain to call right now,” says Baltimore. “We’re all seeing wildly varying estimates of how long this will last, from weeks to months. The only thing we know for certain is that like other major challenges we’ve been through, at some point this will be behind us. We are seeing portfolio companies be aggressive in responding to COVID-19 to protect their businesses and employees, and to shore up their resources. Likewise, when the time is right, businesses should be aggressive in preparing for markets to reopen—which they will.”

Baltimore adds that another certainty is the role M&A played during the last economic recovery. He cites a study by McKinsey, which shows that in the wake of the last downturn the highest-performing public companies engaged in M&A—both divestitures and acquisitions—earlier than others.5 “To pull ahead when conditions improve, companies should be building their acquisition pipelines now,” says Baltimore. “Valuations will likely be more attractive to buyers going forward than they have been looking back.”

A Singular Focus

Neuner speaks for all of Harris Williams when he describes how he is currently spending the bulk of his time. “Right now, our focus is on helping our clients through the crisis stage,” says Neuner. “This challenge is unprecedented, but we are nimble and well positioned to continue providing the very best advice and service through this volatile period. We have worked through challenges with our clients many times in the past, and that’s our sole focus now.”

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Published March 2020

1. Mary Kathleen Flynn, “Brace for impact,” say private equity firms to portfolio companies about the coronavirus,, March 19, 2020.
2. Reuters, March 17, 2020.
3. Channel News Asia, March 24, 2020.
4. Thomson Reuters, U.S. Bureau of Economic Analysis, National Bureau of Economic Research, Centers for Disease Control and Prevention.
5. Martin Hirt, Kevin Lackowski and Mihir Mysore, “Bubbles pop, downturns stop,” McKinsey Quarterly,, May 2019.