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Emerging market M&A gains share on West

By Michael Flaherty and Denny Thomas

SINGAPORE (Reuters) - A burst of corporate acquisition activity in Asia shows that executives throughout the region are gaining confidence in their financial outlook and expansion strategy, with cross-border deals on the upswing.

Asia Pacific M&A, excluding Japan, rose 78 percent last quarter, according to Thomson Reuters, with emerging market acquisitions now one-third of total deal volume.

While the largest transactions still mainly originate in the United States and Europe, a slew of recent deals have come from places like China, the Middle East, and Southeast Asia.

Asia's M&A activity received a boost on Monday with a quartet of Australian deals totaling more than $4 billion and including buyers from Thailand, Singapore, China and Korea.

"What I think you will see over time is a steady increase in confidence of Asian players to go outside and do deals and not just in the West but emerging markets as well, such as Africa," said David Timblick, CEO of Lazard Asia, speaking at the London School of Economic's Asia Investment Banking conference in Singapore on Monday.

Australia's Centennial Coal Co Ltd <CEY.AX> agreed to a $2 billion takeover offer from Thailand's Banpu Public Co Ltd <BANP.BK>, while Anglo American <AAL.L> sold five Australian coal fields worth $488 million to a South Korean consortium.

On top of those deals, Singapore's Wilmar International Ltd <WLIL.SI> agreed to buy CSR's <CSR.AX> sugar business for $1.5 billion, while Australian pallet maker Loscam Ltd said it had been acquired by Hong Kong-based ports operator China Merchants Group <0144.HK>.

"I think Asia M&A volumes will surpass the U.S. and Europe," said Ronnie Behar, Credit Suisse's co-head of mergers and acquisitions for Asia, excluding Japan, who was also speaking at the conference.

As an example of Asian acquisition appetite, he cited the power asset auctions Credit Suisse was involved with in Singapore during the last year or so. The buyers of the three assets were Chinese, Malaysian and Japanese companies.

"Had we done this five years ago, we would have had to go abroad," Behar said.

SELLING GRANDMA?

The climate in Asia is still nowhere near boom times in the U.S. and Europe. Corporate structures and mentalities in Asia are often far different than their Western peers and hinder dealmaking. Timblick cautioned that deal flows in Asia are still a fraction compared to the U.S. and Europe.

"China has ambition and China certainly has capital, but the idea of going out and using that to buy BP <BP.L>," is still a ways off, he said.

Another issue he said is that in Asia, much of the large companies are owned by private families or governments, meaning the free float of shares were often around 50 percent of the company, compared to 80 to 90 percent of a Western company.

"Asia will double, it will triple in size, but whether or not it will reach the size of an Anglo-Saxon capitalist model where you sell your company and you sell your grandmother, I will be interested to see how that develops."

HSBC's Tou Chen Chang countered that Asia's already stands among its Western peers in terms of influence and dealmaking.

Certainly the flurry of activity that popped up on Monday, at a time when regional markets are volatile, bolsters Chang's case.

Chang, HSBC's Asia Pacific head of investment banking, said among the lingering concerns for the region is the risk of bubbles -- both stock market and real estate. He pointed out that China's stock market <.SSEC> has fallen 25 percent in part from measures meant to pop the country's frothy real estate market.

But he ticked off the number of times in the past few years when Western and European institutions reached out to Asian groups for capital or investments, and the large deals that have transpired in Asia lately.

"Whether it's in terms of Asia being an integral part of the financial security of this world, or the center of the largest transactions, or whether it's Asia being the residence of capital, you're seeing that already now," Chang said. "This is not a new paradigm. It's just the fact of today's world."

(Editing by Lincoln Feast)

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