Before the Lunar New Year, many investment banks were counting on the resurgent IPO market and new share offerings to boost profits. The performance of recent initial public offerings so far in this Year of the Tiger has many bankers rethinking that forecast.

UC Rusal, the aluminium producer controlled by Russian oligarch Oleg Deripaska, raised US$2.3 billion only to have its shares fall 26% since the Jan. 26 listing. Last year's biggest offering, the US$7.34 billion listing of China State Construction Engineering, is up just 2.4% since its float. A major test came Monday with the approval of Dai-ichi Mutual Life Insurance's $11.8 billion IPO in Japan.

Many bankers are now returning to a market that in Asia had seemed to have run its course: mergers and acquisitions.

Asian-Pacific companies made US$82.9 billion in acquisitions outside their countries last year, the lowest since 2005, when outbound M&A was US$55.2 billion. That compared with US$127.4 billion in 2008, Dealogic data show.

This year, outbound M&A levels are have jumped to US$20.6 billion from the US$2.5 billion of a year earlier. While the comparison is against a time when the financial crisis made deals uncertain, the jump has bankers returning to some familiar precrisis deal themes: 

Look to China and India. Chinese companies have made $US19.3 billion of acquisitions this year, overseas and domestic, trailed by India, with US$14.5 billion.

"We sense from the conversations we are having with clients now that this will be the year of renewed outbound M&A from Asia," said Farhan Faruqui, head of global banking, Asia Pacific at Citigroup. "Expect to see more headline outbound M&A transactions from China and India."

India will deliver this time. The volume of India-related outbound M&A was only US$11.4 billion in 2009, down from US$18.2 billion in 2008, despite the promise many bankers saw. But year-to-date India outbound M&A has reached $11.1 billion, the highest total on record, according to Dealogic. In fact, at the moment, some of the biggest M&A deals awaiting approval are moves by Indian companies to fulfill their global ambitions.

 India's Reliance Industries sweetened its November offer to take control of LyondellBasell Industries to $14.5 billion. India's Bharti Airtel has made its third attempt in two years to acquire an African business, this time with a $9 billion offer for Zain Africa, a Kuwaiti-owned mobile telecommunications provider.

Resources will predominate. China's US$300 billion sovereign-wealth fund, China Investment Corp., announced more than US$8.15 billion of acquisitions last year, including a 15.8% stake in AES of the U.S. for US$1.58 billion, 17.2% of Canada's Teck Resources for US$1.5 billion and the US$856 million purchase of a 15% stake in Singapore-listed Noble Group. "We'll see further China-into-Australia deals" centered on metals, mining, oil and natural gas, said Matt Hanning, UBS joint head of Asia M&A. "This will probably play into Canada as well."

The moves out won't just be by the Chinese, or Indians, but "Japan, South Korea and Southeast Asia will also join the hunt for resources," said Chang Tou Chen, head of advisory for Asia-Pacific at HSBC Holdings.

 Resources aren't the only buy. Jayanti Bajpai, co-head of Asian-Pacific corporate and investment banking at Bank of America Merrill Lynch, says, "While the resources theme will continue to play out, manufacturing, brand-name retail and domestic consolidation will also feature."

Telecommunications, in particular, might come to the fore. In addition to Bharti's move to acquire Zain, China Unicom Ltd.'s Hong Kong arm said Monday it might take an equity stake along with partners bidding for a Nigerian telecommunications concern.

IPOs Go M&A. Companies such as CapitaLand of Singapore and Wynn Resorts used IPOs to raise money through units in Asia, notes Todd Marin, head of investment banking Asia-ex, J.P. Morgan. "This year, with more buoyant M&A markets, some companies may choose to sell as opposed to list these assets," he said.

One closely watched sale: Royal Bank of Scotland Group continues to sell assets in Asia.

Financing and sentiment will be key. With markets still uncertain, financing has been tough to find except in a few circumstances. The deals that attract financing will involve strong balance sheets or special opportunities, bankers say.

"M&A activity will grow, because the overall view of U.S. and European economies is positive, but that growth will be modest, as the continued effects of the financial crisis remain," said Joe Gallagher, head of M&A, Asia-Pacific, at Credit Suisse.

"Financing markets are changing and investors have become more selective," said Jason Rynbeck, head of M&A for the AsiaN-Pacific region at Barclays. "For the right strategic deal and the right client, there is plenty of liquidity available."