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In a recent article published by Review of business law in AsiaMoFo partners Lip Kian Ang and Marcia Ellis shared their thoughts on investment trends and regulatory developments.
Lip Kian sees strong interest in acquisition and investment transactions in the technology, payments and data center sectors in Southeast Asia. However, he notes that deals are taking longer to close as acquirers and investors become more cautious due to tight liquidity and broader macroeconomic conditions. In the area of private equity and venture capital, Lip Kian observes that investments are increasingly being made using convertible instruments such as convertible notes and simple agreements for future actions, as investors and companies are reluctant to engage in funding rounds given falling valuations.
In the current market uncertainty, Lip Kian expects acquirers and investors to become more selective and evaluate targets more carefully to protect their deals. “The terms of the deal will likely become more buyer-friendly if current market conditions persist or worsen. For example, we have seen investors request more aggressive liquidation preferences or, in the case of convertible note financing , more information and governance rights and higher discount rates upon conversion,” Lip Kian said.
On the regulatory side, Marcia asserts that China-related transactions are affected by the changing domestic regulatory landscape and changing international regulations and enforcement priorities, with a specific impact on China-related transactions. She explains: “Looking abroad, geopolitical tensions and the steady rise of national security review regimes around the world have continued to dampen outbound activity. Many geographies where good targets have been located historically, such as the United States and Europe, have doubled their reviews of foreign investment in sensitive sectors.
“As a result, Chinese acquirers often look further afield for opportunities in markets like Southeast Asia, the Middle East and Latin America,” Marcia added.
Overall, Marcia believes that longer-term investor sentiment among companies and private equity players active in China remains positive. Strategic M&A deals in sectors that support China’s national policy guidelines of decarbonization, digitalization and domestic consumption are attractive, as are investments that can be linked to the theme of common prosperity. “We have seen significant deals in technology, media and telecommunications, healthcare and life sciences, and alternative energy come to fruition this year as investors seek to increase market share. and deepen their capabilities in targeted areas,” Marcia said.
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