Increasingly, Indian companies are finding South East Asia the new land of opportunity, as are executives from other parts of the region…Despite major geopolitical upheaval around the world, when Baker McKenzie recently surveyed 100 C-suite executives in India, we found a bullish business community, both on the domestic and international fronts.In fact, three quarters of mid-to-large...
Increasingly, Indian companies are finding South East Asia the new land of opportunity, as are executives from other parts of the region…
Despite major geopolitical upheaval around the world, when Baker McKenzie recently surveyed 100 C-suite executives in India, we found a bullish business community, both on the domestic and international fronts.
In fact, three quarters of mid-to-large sized Indian companies still plan to increase domestic investment by at least 10% over the next two years, while almost two-thirds of Indian companies are looking to increase their offshore investments by 10% or more, while another quarter are planning to increase their international investment by up to 10%. This is all the more positive in the face of currency pressure and recent political uncertainty.
These findings are part of a wider survey of 600 business leaders across the Asia-Pacific region. Our latest report, 'The Age of Hyper Complexity: Asia Pacific Business and Legal Macro Trends', with interesting views from Indian businesses.
In terms of mergers and acquisitions (M&A) deals involving Indian buyers, we see a clear expectation that deal making will continue to increase, with 7 in 10 Indian business leaders expecting a significant increase in M&A deals in their industry. In terms of where Indian businesses are looking to acquire and invest, domestic targets destinations still top the list, but South East Asia now runs a close second.
The strong run of deal making and international expansion that has emerged in India in recent years is set to continue. We see some really interesting and ambitious business strategies developing among our Indian clients, as they look to grow, invest and raise capital in various markets around the world.
The US is the number one destination for Indian companies looking for M&A and other investment opportunities outside Asia (44% of Indian business leaders say that the US is a top destination), while continental Europe rounded out the Top Four.
Increasingly, Indian companies are finding South East Asia the new land of opportunities, as are executives from other parts of the region. We have seen transactions in sectors including healthcare, insurance, consumer and industrial between Indian companies and counterparts in Malaysia, Indonesia and Thailand, where there seem to be a good strategic and cultural fit for emerging Indian multinationals. However, intra-Asian deal sizes are still usually smaller than those in Western markets, and we also expect to see more mega deals involving Indian companies in the US and Europe making headlines.
At the other end of the spectrum, Indian executives are far less positive regarding the UK, which had until very recently been a key target country for Indian acquirers, but no longer. According to our research, 1% of those responding in India, and indeed across Asia more broadly, look towards to the UK as a top destination for investment. This is the lowest of any Turning to the US-China Trade War, Indian corporates are the least concerned of any major economy in the Asia-Pacific, with the majority of companies in India making little or no changes to their supply chain and production as a result of the ongoing trade dispute. This compares to Hong Kong companies for example, where the vast majority of companies are making major changes. market included in our survey, with the Brexit factor clearly having a major impact.
When asked about the key macroeconomic challenges they faced, executives in India and across the region very clearly identified compliance and regulatory scrutiny as their number one issue, a trend that is starting to fundamentally reshape business decision-making, overtaking challenges such as technology disruption, cost pressures and economic uncertainty.
Compliance and regulatory scrutiny are also leading driver of cost increases for Indian businesses. In the context of M&A and other investment opportunities globally, this translates into added complexity and cost of a renewed focus around the world to create or enhance regulatory regimes enabling the pre-screening of foreign investor deals.
In terms of where businesses want to invest, our survey also shows a strong focus on the Indian subcontinent.
We are entering a new era of multilateralism in the Asia Pacific with macro plays such as ASEAN integration, Japan's outbound activities, India's Look East and Taiwan's Southbound policies, to name just a few, we see governments and large corporates in Asia increasingly working hand in hand to further geopolitical goals through trade and investment, often in consortia of small groups of nations with shared interests. Much of this interest now centers around South East Asia and India.
For business leaders with ambition and focus, it is a time of renewed opportunity in India and across the Asia-Pacific region.
Disclaimer – The views expressed in this article are the personal views of the author and are purely informative in nature.