This article first appeared in The Edge Financial Daily on December 13, 2017
KUALA LUMPUR: Malaysia’s deal activity saw a notable uptick in 2017, according to advisory firm Duff & Phelps, with deal value swelling by 30% year-on-year (y-o-y) to US$20.3 billion (RM82.82 billion) from US$15.6 billion last year.
“This is the highest deal value we have seen for any year, since we started tracking Malaysian deals in 2013,” Duff & Phelps Singapore Pte Ltd managing director Srividya C Gopalakrishnan said in its Transaction Trail Annual Issue for 2017, which was released yesterday.
The report covers mergers & acquisitions (M&A), private equity (PE)/venture capital (VC) investments and initial public offerings (IPOs) in Singapore, Malaysia and Indonesia during the December 2016-to-November 2017 period.
As at November this year, Duff & Phelps said there were 445 deals concluded in Malaysia, of which 408 were M&A, 23 were PE/VC deals and the remaining 14 were IPOs.
Duff & Phelps said inbound deals led the M&A activity in Malaysia, accounting for 60% of the total 408 M&A deals valued at US$17.6 billion during the year.
“The M&A deal value is also the highest in the past five years,” Duff & Phelps noted.
According to Duff & Phelps, the energy sector continued to witness high deal value activity for inbound M&A for Malaysia, with real estate being the top sector for domestic M&A.
“The two largest M&A transactions in 2017 for Malaysia were the acquisitions of 50% stakes in refinery and petrochemical integrated development (Rapid) and PRPC Polymers Sdn Bhd, both by Saudi Arabia’s Aramco,” it said.
In February, Saudi Aramco bought a 50% stake in Rapid for US$7 billion during Saudi Arabia’s King Salman’s visit to Malaysia, while Petronas Chemicals Group Bhd divested its 50% stake in PRPC to Saudi Aramco for US$900 million in early October.
The third largest M&A was S P Setia Bhd’s acquisition of I&P Group Sdn Bhd for US$851 million.
PE/VC investments transacted in Malaysia amounted to 23 deals this year, with a combined deal value of approximately US$1.04 billion.
Out of the three countries, Malaysia was the smallest contributor, accounting for 4% of the PE/VC deal value of US$26.2 billion in 2017. Singapore was the largest contributor with a total deal value of approximately US$22.8 billion or 87% of the total PE/VC deal value in the region, followed by Indonesia at US$2.4 billion or 9%.
In terms of IPOs, Malaysia experienced significantly more capital raised in 2017 compared with 2016, said Duff & Phelps. This was due to the IPO of Lotte Chemical Titan Holding Bhd, which is the largest IPO in Malaysia in 2017 — raising total capital of US$878 million or more than half of the US$1.65 billion total capital raised on Bursa Malaysia.
Other notable IPOs in Malaysia during the year were Eco World International Bhd (US$580 million), Serba Dinamik Holdings Bhd (US$91 million) and KIP Real Estate Investment Trust (US$52 million).
In terms of IPO deal value in the three countries, IPO listings in Singapore accounted for the largest share of 62%, followed by Malaysia at 28% and Indonesia at 10%.
Duff & Phelps also noted that during 2017, Singapore, Malaysia and Indonesia witnessed a record level of deal activity at over US$130 billion of value from M&A, PE/VC and IPO, surpassing the historic highs in 2015 of over US$115 billion.
“While the M&A market remains stable, the growth is driven by an increase in high-value PE buyouts and PE/VC investments, supported by recovery in the IPO market,” it added.
“With the strong regional demographics, globalisation and increased interest from Asian and global investors in the region, spur in technology penetration, and efforts by government bodies to encourage investments and more focus on intellectual property, we see the positive deal momentum continuing into the future,” said Srividya.