Intra-Asia M&A softens the blow of pullback in first-quarter dealmaking

Sumeet Chatterjee and Jamie Freed

* Asian M&A falls 39 pct in Q1 from year earlier

* Outbound deals to U.S., Europe slump

* Intra-Asia deals relatively strong

HONG KONG/SYDNEY, March 31 (Reuters) - Merger and

acquisitions involving Asian companies fell 39 percent in the

first quarter of 2017 to $176 billion, the lowest level in

nearly three years and highlighting a sharp pull back in

overseas deals by Chinese firms.

While dealmaking was weak across the board with big falls in

outbound deals targeting U.S. and European firms, intra-Asian

M&As were by comparison relatively strong - increasing their

tally of the total to 61 percent from 56 percent a year earlier,

Thomson Reuters data shows. The figures reflect deals involving

Asian companies excluding Japan.

The intra-Asia deals reflected sector consolidation in major

Asian economies and privatisation and asset sales in countries

such as Singapore and Australia.

Most of the bidders were either cash-rich Asian companies or

private funds keen to tap into Asia's increasing consumer

demand, investment bankers said.

"M&A deal activity within the region remains robust," said

Mervyn Chow, Asia co-head of investment banking and capital

markets at Credit Suisse.

"While the capital controls in China may impact cross-border

deals in the short term, we expect to see China investments that

are strategic in nature to continue."

Nine of the top 10 Asia-Pacific deals announced in the first

quarter of this year were intra-regional. The merger of

Vodafone's India unit with rival Idea Cellular

topped the chart.

Bankers said they expected more of the same, pointing to the

potential sale of Singapore-listed Global Logistic Properties

, which has a market value of over $9 billion, and the

privatisation of power companies in Australia.

M&A advisory fee volume dropped nearly 40 percent to $321

million. Morgan Stanley was the top advisor, followed by

Industrial and Commercial Bank of China and Credit

Suisse.

DEAL PIPELINE

In 2016, announced M&A deals involving Asian companies,

excluding Japan, totalled $1.2 trillion, just below a record

level in 2015.

Tighter regulations in China have made it tougher for

Chinese firms to launch takeovers overseas, which had a major

impact on the region's overall dealmaking in the first quarter.

Deals between Asian companies totalled $107.4 billion in the

first quarter of 2017, down from a year-earlier $163.4 billion.

Asia-Pacific outbound deals targeting U.S. assets fell 78

percent in the first quarter from a year ago, while similar

deals targeting European firms declined 85 percent.

Chinese buyers remain interested in Australia, but

constraints on capital outflows have made it more difficult for

deals to get done, said Deutsche Bank's Australia and New

Zealand co-head of corporate finance Bruce MacDiarmid.

"What we are seeing now is those deals that do get done have

a strong strategic relationship to state-owned enterprises and

what they want to achieve," he said. "Other deals will be harder

for them to do now."

($1=1.3067 Australian dollars)

(Reporting by Sumeet Chatterjee and Jamie Freed: Editing by

Anshuman Daga and Neil Fullick)