TWO REGIONAL CONSULTANTS EXPRESS CONFIDENCE IN A GROWING M & A MARKET IN THIS STILL-PREFERRED GROWTH REGION .
China ’ s Greenland Group in February agreed to sell to Pro-Invest Group the Primus Hotel in Sydney for a reported $ 132 million .
that bolster balance sheet by new issue or significant shareholders that liquidate positions for reasons mentioned above ( an American PE firm recently engineered such a transaction in Japan [ not the Blackstone deal ]).
While some of these fit the general description of distress , excluding Oceania , Asia does not typically see then same volume of distress sales “ encouraged ” by lenders . They just do not have desire to work through to the asset . Part of this is due to historically strong see some opportunities arise where desired assets become available due to ownership realigning their portfolio for strategic reasons , or to improve liquidity .
Owners of desired assets / companies will certainly listen a lot more now , whereas before they would not even entertain a conversation . The more conversations that occur , the more we will see these opportunistic pathways to these cornerstone assets open up , and the higher the likelihood of more trades occurring . This applies not only to the real estate but to tourism-related service providers , including hotel companies .
I have lived through other Asian crises and now viewing the start of the COVID financial crisis , the impact of this crisis on M & A will be greater than the others . Government supports will burn off and effects will be lingering and that suggest strongly we will see greater M & A activity .
Robert Hecker : We expect to see increased M & A activity in Japan and Australia / New Zealand as these are traditionally the most active markets . The increase will be driven less by distress than by existing owners rethinking their asset holdings in the hospitality sector .
Elsewhere , it ’ s likely to be subdued activity as governments seek to protect and support existing owners and owners generally not sufficiently stressed to accept distressed sale pricing on their relationship lending , and part of it is their history is limited with this type of precedent . Add to it the strong government support of tourism players and relaxed policies of bank regulators , and you have a clear view as to why activity levels have not been high .
This cannot and will not continue indefinitely , thus a prolonged impact of COVID is bound to see this support of the industry diminish and as a result there will be more activity , albeit at a lower level relative to the United States .
Might we see more activity of banks selling debt to others that might be more aggressive in working their way to the asset ? I think we will but will never approach levels we see in the U . S . or Australia due to what we often refer to as “ local issues .”
Outside of destressed or ‘ stressrelated ’ activity , I do think we will
I SUSPECT MOST WOULD STILL SELL AS LONG AS IT ’ S AT OR NEAR THEIR PRICING . THEY ARE READY TO PASS ON THE RESIDUAL AND POTENTIAL FUTURE TRIALS AND TRIBULATIONS TO OTHERS .
ROBERT HECKER
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