A cautious start, but optimism remains for H2

Macro headwinds and geopolitical uncertainty weigh on Q2 activity

The moderation in Asia M&A activity from the March peak into Q2 suggests that geopolitical uncertainty, valuation gaps and financing constraints are resurgent impediments to deal execution. Some Asian economies which are net energy-importing face a stagflationary risk arising from their dependence on imported energy and limited policy room to cushion higher prices stemming from the Hormuz supply shock. The prospect of increased US interest rates (and similar rate hikes and tightening monetary policy across Asia) is also weighing on dealmaking, particularly in markets more exposed to energy cost pass-through such as India and parts of Southeast Asia.
 

Activity across the region

Headline numbers

Total Asia M&A deal value in H1 2026 (to 30 June) was approximately US$347 billion across 8,164 transactions, with notably strong activity in February and March followed by a more mixed Q2. 

March was the standout month by both value and volume, while May – despite recording the lowest deal count of the period – produced the second-highest aggregate deal value, reflecting a marked concentration of larger transactions.

Source: LSEG Data (7 July 2026).

By geography, China, India and Japan continue to dominate as target nations, accounting for the majority of deal flow in Asia. 

Sectoral trends

Consistent with previous years, the technology, industrials and financials sectors accounted for the majority of deal value in Asia. 

Straddling sectors, the AI supercycle continues to drive regional activity, with digital infrastructure and expansion of compute capacity attracting resilient investment across Asia. We expect momentum to continue in H2 2026 and beyond, with several major Asia-Pacific data centre platforms currently on the market or expected to launch sale processes or fundraisings, and many strategic and investors also looking at greenfield opportunities across the region. 

Sectoral activity

Source: LSEG Data (7 July 2026).
 

Market focus

China

China remains the largest M&A market by value, though activity is moderating following its 2025 surge. Purely domestic transactions continue to represent the majority of China’s deal flow, though the Saudi-PIF-linked estimated US$6 billion acquisition of Shanghai Moonton Technology Co is a notable exception¹, along with the continued trend of strategic collaborations with foreign companies, including a range of sectors including consumer, healthcare and technology. Domestic activity is concentrated in technology (AI funding rounds, software plays and semiconductor acquisitions) and  industrial consolidation.

Japan

In Japan, corporate governance reforms continue to be the structural engine behind take-privates and capital return transactions. We expect that carve-outs of operating companies' non-core assets will continue apace. Despite recent efforts by the Japanese government to strengthen the yen and the possibility of further rate hikes from the BOJ, the yen’s continued weakness should support further inbound investment in H2 2026. Notable transactions announced from foreign private capital investors in H1 2026 include KKR/Taiyo Holdings LBO (US$2.5 billion), Apollo/Nippon Sheet Glass (US$2.6 billion) and the competing bids for Kakaku.com announced by EQT and Bain Capital/LY Corp, respectively.²  We are also seeing continued interest by foreign investors in digital infrastructure in Japan, particularly data centres.  

India

India attracted more inbound cross-border M&A transactions than any other Asian market in H1 2026, leading the region by both deal count and deal value. This reflects India’s continued attractiveness to strategic foreign capital, driven by its strong digital economy, global supply chain diversification, its ambitious renewable energy targets as well as the growing middle class creating strong demand in the consumer, healthcare and pharmaceutical sectors. India’s credible exit pathways, particularly through its active capital markets, is also driving confidence for investment by private capital. 

Rest of Asia

South Korean and Taiwanese activity remains concentrated in electronics and semiconductors, while Hong Kong's buoyant IPO market remains an attractive exit route for Chinese companies. 

Singapore continues to function as the region's principal hub for cross-border transactions, though Chinese regulators' recent blocking of Meta's proposed acquisition of Manus (a Chinese-founded AI agent developer domiciled in Singapore) illustrates how US-China competition is shaping deal structures and capital flows across the region.

Outside of the bigger Asian markets, Indonesia and Malaysia both recorded similar deal counts to Singapore, Hong Kong and Taiwan despite lower headline values, reflecting active mid-markets in industrials and financial services. Thailand recorded more modest activity levels across those sectors, though deal flow remains steady. Malaysia is also heavily favoured for digital infrastructure, benefiting from hyperscaler demand and comparatively supportive regulatory frameworks.
 

Cautious optimism: The case for an H2 recovery

While activity in Q2 2026 has been more mixed than the momentum in February and March suggested, we do not think it fundamentally alters the trajectory for Asia M&A in 2026.

With investors increasingly pricing in geopolitical and economic disruption as the new normal, we are cautiously optimistic that structural tailwinds will support a recovery in dealmaking in 2H 2026, though the pace and shape of that recovery will likely remain uneven across markets and sectors.