Asia Pacific's top 50 consumer products companies (Asia Pacific CP 50) are engaging in cross-border M&A (mergers and acquisitions) to accelerate growth, according to Bain & Company's report Overseas Ambition: Asia-Pacific Consumer Products Companies Use M&A to Accelerate Growth.
Between 2012 and 2021, the Asia Pacific CP 50 increased overseas revenue three times faster than domestic revenue. Overseas revenue compound annual growth rate (CAGR) was nine percent, compared to only three percent CAGR for domestic revenue. In 2021, nine of the Asia Pacific CP 50 generated more than half of their total revenue offshore, and another 15 generated more than a quarter of their total revenue offshore.
For Japanese CPs, overseas revenue has become a primary driver of top-line growth. Over the past decade, Japan-based CPs' domestic revenue CAGR fell into negative territory (-4 percent), while overseas revenue increased by six percent CAGR. Ten of Asia Pacific's top 15 CP companies with the highest international revenue contribution in 2021 were Japan-based.
China-based CPs experienced the fastest offshore growth, with international revenue at 17 percent CAGR between 2012 and 2021. Domestic revenue grew at seven percent CAGR during the same period.
Elsewhere in the Asia Pacific region, overseas revenue significantly contributed to overall revenue—nearly equal to domestic revenue.
"Traditionally, Asia Pacific CPs have struggled to grow overseas. Brands developed for local audiences sometimes fail to resonate with overseas consumers, and overseas expansion creates challenges and uncertainty that some organisations are unwilling to navigate," said Gino Dizon, a partner of Bain's consumer products practice based in Manila.
Gino Dizon
"Cross-border M&A thus becomes the fastest way for Asia Pacific CPs to build business overseas."
Asia Pacific CPs that pursued international growth through M&A earned more overseas revenue than companies that expanded organically. On average, those that pursued overseas M&A increased their overseas revenue contribution by 27 percent, eight percentage points more than CPs that grew organically overseas. Among the Asia Pacific CP 50, 19 companies were international movers. Of those, 68 percent leveraged cross-border deals to grow international businesses.
"International M&A activity is still heating up among CPs. Activity dipped during the pandemic but quickly rebounded. Cross-border deals accounted for 43 percent of Asia Pacific CP deal volume in 2022. Before 2020, on average, a third of strategic deals were cross-border," said Shanghai-based Philip Leung, a leader of Bain's Asia Pacific M&A practice.
Philip Leung
Bain identified four ways for CPs to grow through M&A. Firstly, to scale in a new or subscale market by acquiring an established production or distribution network. Second, expand portfolios and add product segments to return to the current markets. Thirdly, to make an insurgent play and buy into small or young brands with high-growth potential. And finally, to expand capabilities to support the core business.
Of the 56 cross-border deals with a deal value of over USD 50 million between 2017 and 2022, acquiring scale in the target market was the most frequent cross-border deal objective (55 percent), followed by deals for portfolio expansion (25 percent).
"M&A is just one part of the story. The other is a seamless integration plan. The acquisition objective is vital because it affects the integration and how CPs derive value. Integration plans should be tailored to the unique deal objective.”
