This article first appeared in The Edge Financial Daily on December 12, 2018

KUALA LUMPUR: Corporate deal activity in Malaysia fell significantly in 2018 after reaching a record level in 2017 possibly due to political uncertainty, says global valuation and advisory firm Duff & Phelps.

In its Transaction Trail Annual Report released yesterday, Duff & Phelps said Malaysia recorded total deals in mergers and acquisitions (M&As), private equity/venture capital (PE/VC) and initial public offerings valued at US$12.5 billion (RM52.25 billion) in 2018 compared with US$20.3 billion in 2017.

“This could be due to political changes and businesses taking a wait-and-watch approach on strategic growth initiatives. However, we have seen the momentum pick up towards the end of the year with a few notable transactions,” said Srividya Gopalakrishnan, managing director at Duff & Phelps’ Singapore office.

In terms of M&A deals, the report said Malaysia recorded 338 in 2018, valued at US$11.4 billion, where inbound deals accounted for a majority of the deal value by capturing a share of 50%.

This is lower than US$17.6 billion for last year.

Duff & Phelps said the healthcare sector in Malaysia witnessed high-value inbound and outbound M&A deal activity, with real estate continuing to be the top sector for domestic M&A.

The two largest M&A transactions in 2018 for Malaysia were the acquisition by Mitsui & Co Ltd of a 16% stake in IHH Healthcare Bhd from Khazanah National Bhd and the acquisition of a 30% stake in Acibadem Saglik Yatirimlari Holding AS by IHH Healthcare

Besides Malaysia, the report also takes a look at transaction and capital market activities in Singapore and Indonesia.

“In 2018, the region (Singapore, Indonesia and Malaysia) recorded total deal activity valued at over US$136 billion spread across 1,419 deals, with over 15 transactions valued at more than US$1 billion each.

In comparison, over 39,000 deals valued at over US$3.5 trillion were registered globally in the same period, the report noted.

Singapore recorded a total of 857 deals worth US$106.2 billion for 2018 as compared to 842 deals worth US$101.9 billion for 2017.

In Indonesia, M&A activity reached a record of US$15.1 billion in deal value in 2018 compared to US$6.6 billion in 2017, driven by large transactions in the materials, banking, financial services and insurance and energy sectors.

Srividya said that over the last seven years of tracking transactions in the region, a notable change can be seen in the overall deal values as well as in the size of the transactions, which have substantially increased over time, especially for Singapore.

“Perhaps, one of the most impactful trends has been felt in the PE/VC investment space, and we can proudly say that our region has now come of age in its ability to attract more alternative investment funds as evidenced by a significant growth in dollar values invested.

“It will be interesting to observe how the future plays out amid such growth opportunities, changes to asset allocation strategies, regulatory changes, trade tensions and other global uncertainties,” she said.