Parag Bhide
Partner, AQUILAW, Mumbai
parag.bhide@aquilaw.com

Subarna Saha
Senior Associate, AQUILAW, Kolkata
subarna.saha@aquilaw.com

Introduction

In an era of geopolitical flux and economic reconfiguration, Asia stands as the epicentre of the next phase of global growth. While organic growth is dependent on various factors in the economy, mergers and acquisitions (M&A) have become a vital mechanism for expansion through unorganised growth. M&A enable firms to access new markets, technologies and capabilities while diversifying risks across jurisdictions. Beyond sheer scale, Asia offers several advantages, including strong regulatory frameworks, regulators’ incentives, an abundance of accessible workforces, policy level changes, boosts in clean energy, excellent logistics and supply chains and so on. As per the World Investment Report of 2025 published by the United Nations, M&A activity in Asia is projected to remain strong.^[1]

One of Asia’s paramount advantages lies in its vast and rapidly expanding markets in both size as well as growth. Asia has generated more than US$40tn in GDP in 2025,^[2] with key countries in the region projected to grow at five to six per cent annually.^[3] As per the OECD projections, Asia has already become the largest continent for middle-class spending since 2015 and is likely to lead this space until 2030.^[4] This, together with rising per capita income levels create an irresistible demand pull, enabling foreign players to achieve rapid penetration and economies of scale at an accelerated pace.

In this article, we have explored a few key factors triggering growth of cross-border M&As in Asia, and certain practical tips to be kept in mind by the investors while transacting in the region.

Regulatory climate

All top economies in Asia have a strong regulatory framework with regulators acting as facilitators of business. Prior to undertaking any investment, however, a careful consideration of local regulatory framework is advisable. Many new-age sectors and industries may be under-regulated in some countries in Asia. This, however, creates a potential of future regulation, which might affect the investment outlook and business projections. A pertinent example is the ban introduced in India in 2025 on online gaming that completely disrupted the sector, resulting in substantial valuation cuts. Similarly, while few countries have well-defined laws for cryptocurrencies, countries like Vietnam and India are yet to come out with a consolidated regulatory framework. Further, countries like Japan, which had clear regulation for cryptocurrencies, are now steering towards a regulatory overhaul.

Coming to the star of new age sectors, that is, artificial intelligence (AI), the sectoral position is generally similar. Unlike the Artificial Intelligence Act of the European Union, regulations governing AI are evolving in the region, and the majority countries are yet to adopt comprehensive legal framework governing the sector.

Therefore, prior to undertaking an M&A transaction in the region, investors must seek expert advice on regulatory aspects to assess regulatory risks, particularly, if investing in modern and new-age businesses.

Policy level changes

On a policy level, governments in various Asian countries are introducing initiatives to attract overseas investments by offering tax incentives, regulatory streamlining and sector-specific subsidies. Programmes such as Vietnam’s preferential corporate tax rates for high-tech FDI, India’s Performance Linked Incentive (PLI) scheme providing financial rewards on incremental sales from goods manufactured in India, China’s policy to remove restrictions on the use of domestic loans by foreign investment companies and India's PLI scheme for electric vehicles (EVs), are complementing other existing factors for boosting investor interest.

Generally, incentives and grants from government come with their own specific terms and conditions. When considering acquiring a target or investing in such sectors, care should be taken to review such incentives (including any restrictions on change in control requirements) to analyse business longevity and margin risks.

Therefore, investors must carefully study the incentives, qualifying conditions and the business impact in a long run.

Abundance of human capital

Asia has one of the highest talent densities in the world which provides impetus to labour intensive industries. With an abundance of educated and cost-effective workforces, Asia provides scalable capacity for manufacturing, service-oriented industries and new age businesses like technology, alternative energy, semi-conductors, AI, etc. Further, the presence of a large English-speaking population in the region fosters ease in deal-making.

While labour abundance has always been a beacon for investors, prior to undertaking any M&A in the region, investors must apprise themselves with region-specific labour law requirements which are often times fragmented intra-jurisdiction. For example, India has labour laws both at Central and state level which govern the employer-employee relationship. Moreover, recently implemented new labour codes in India are still evolving and rules under these codes are yet to be implemented.

Therefore, prior to undertaking an M&A transaction in the region, one must study the local market and political climate and seek expert advice on labour regulations to assess on-ground realities. Separately, on closure of an M&A transaction in the region, if the investors are desirous of implementing their global HR policies for the target, such global policies should be carefully vetted to meet local law requirements.

Supply chain diversification

Supply chain diversification continues to remain one of the key driving factors for cross-border M&A in Asia. This approach favours brownfield acquisitions over greenfield developments, thereby facilitating integration with existing facilities, skilled workforce and supplier networks, where the investors can benefit from reduced timelines and established systems as opposed to building a business from scratch. While supplier diversification is a commonly undertaken initiative for global conglomerates, care should be taken to select new jurisdictions keeping in mind export control laws of the specific jurisdiction. Moreover, any regulatory or contractual consent requirements need to be analysed in depth to avoid delays in the transaction as well as long term business impact.

Prior to undertaking an M&A transaction in the region, investors must therefore review arrangements with the suppliers, customers, any regulatory or contractual approval requirements keeping in mind long-term objectives.

Conclusion

Asia is poised to attract investor interest for large M&A opportunities. The investors, however, must seek expert local advice to avoid any financial, regulatory, as well as reputational, risks. Aspects such as exchange-control regulations, restrictions on fixed returns and requirements for valuation and pricing of shares need to be analysed to achieve the intended commercial objectives through inorganic growth. While advantages for cross-border M&A in Asia are aplenty, each jurisdiction as well as each sector comes with its own set of local regulatory regimes and unique needs. Therefore, there can be no one-size-fits-all approach to transactions across Asia.