‘Dry powder’ driving Asia’s M&A demand, says BMS CEO Sandra Lee

The demand for mergers and acquisitions (M&A) insurance is accelerating across Asia, with Japan and India leading the charge. Sandra Lee, chief executive of BMS Group in Asia, attributes this growth to shifting capital flows, market dynamics, and broader economic factors—as well as a greater awareness of the product itself.

“The big geographies driving growth are noticeable in Japan and India,” Lee told EAIC Today, noting how companies are now increasingly seeking specialised insurance solutions to mitigate transaction risks in Asia.

M&A insurance and associated transactional risk insurance products are types of insurance that can help buyers and sellers mitigate the risks associated with a merger or acquisition. The line of business has been a growth area for insurers in recent years.

In Japan, regulatory changes and the rising cost of compliance for publicly listed companies has prompted more businesses toward private transactions—and purchasing M&A insurance.

“The cost of compliance is rising, not just financially but also in terms of resources and human capital,” Lee explained. Many companies are reassessing the value of being publicly traded given weak capital markets, leading to a surge in private deals. Generational transitions among Japanese businesses are also playing a role. India is witnessing similar activity, fuelled by a strong economy and increased foreign investment.

“There’s a lot of dry powder, a lot of capital waiting to be deployed,” Lee said.

Moving to alternatives 

Lee observed a broader shift in the flow of capital across Asia, where some markets are benefiting from the slowdown in others. “A lot of capital that wasn’t deployed, for example in China, for the last 15 to 20 years, is being shifted to alternative markets where investors see growth potential,” she said.

“We’re on various roads coming to the same point,” Lee said. “There is capital looking to exit a certain geography or sitting around, waiting to be deployed, leading to a rise in deal-making opportunities in certain markets.”

“That gap isn’t being met, so deals are not being done.”

The post-COVID-19 pandemic economic environment has added new layers of complexity. “A number of target companies or operating businesses weren’t able to perform as one would have expected over the period of COVID,” Lee said.

This has led to a shift in market dynamics, with certain once-hot sectors now facing reduced demand. “That’s resulting in a big gap between the bid and ask spread,” Lee noted, adding that “sellers haven’t come down from the top valuation range, but buyers are pricing in the higher cost of capital and lower demand”.

“That gap isn’t being met, so deals are not being done,” she noted. “But in the meantime, capital is being accumulated and not being deployed.” Funds and corporates are both under pressure to deliver returns. “That pressure point has to be reallocated and deployed somewhere,” Lee explained.

A broad strategy

BMS has been quick to respond to this demand, particularly in Japan, where it launched its operations in mid-2023. The expansion is part of a broader strategy to position itself as a key player in providing financial institutions with independent advice and bespoke risk solutions. 

“There’s a big gap in the market when it comes to independent brokers focused on M&A insurance, and we’ve filled that space quite neatly,” Lee stated.

The firm has built a presence in key financial hubs, including Hong Kong, Seoul, Singapore, and Tokyo. “We’re in all the financial hubs, so it’s a natural expansion for us to be a financial institutions-focused broker on the retail side,” Lee said.

“We’re operating on one single profit and loss, and that’s a big differentiator,” she highlighted.

“We are focused on growing our bench strength.”

Beyond M&A, Lee sees opportunities in nat cats. “Natural catastrophes are a big topic of discussion, particularly in Southeast Asia, which is underinsured,” she said. BMS is exploring the use of insurance-linked securities as a way to bring alternative capital into the market, especially as traditional insurers have become more hesitant to take on these risks.

Cyber insurance is another area ripe for growth that BMS is targeting. “Cyber is still very much an underinsured area in a lot of Asia,” Lee said. While challenges remain in terms of pricing and demand, the potential for expansion is there, she added. BMS is actively looking at ways to grow in this space, particularly as businesses across Asia become more aware of the risks associated with cyber threats.

“We are focused on growing our bench strength, expanding in key markets, and being the go-to broker for financial institutions across Asia,” Lee said of BMS’ wider strategy in the region. However, she clarified that the firm isn’t looking to plant flags in every country. Instead, it is focused on strategic acquisitions and organic growth. 

For more news from the East Asian Insurance Congress conference (EAIC) click here.

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