SINGAPORE (July 17): Singapore continues to remain the driving force between merger and acquisition (M&A) deal-making in Southeast Asia, contributing to over 70% of the region’s M&A value in 1H17, according to global valuation and corporate finance advisor Duff & Phelps.
Based on key findings from its M&A publication Transaction Trail for the first half of 2017, Singapore recorded a total of 485 deals – including M&A, private equity/venture capital (PE/VC) and initial public offerings (IPOs) – worth US$46.1 billion (S$63.1 billion), up from a total of 383 deals worth US$43.4 billion in 1H16.
M&A comprised the bulk of 1H17 deal volume at 383 deals worth US$42.6 billion, up 13% in deal volume from 339 deals valued at US$40.5 billion in 1H16.
In a press release on Monday, Duff & Phelps states that the M&A deal values continue to be driven by sizeable transactions by sovereign wealth funds GIC and Temasek Holdings in consortium, as well as standalone investments.
These are complemented by other notable deals such as Exxon Mobile Corp’s acquisition of InterOil Corp; Mapletree Investments’ acquisition of US Student Housing Assets; Mercatus Co-operative’s acquisition of Jurong Point Mall; as well as Jacobs Douwe Egberts BV’s acquisition of Super Group, adds the firm.
Particularly, outbound deals grew 5% from a year ago with 294 cross-border M&A deals in Singapore registering a total of US$37.1 billion.
The bulk of the total deal values came from 190 outbound deals made by Singapore-based companies or sovereign wealth funds acquiring overseas companies, which amounted to US$29.2 billion – over 68% of total deal value for the period in the M&A segment.
In contrast, domestic deals contributed to 13% of total M&A deals valued at US$5.4 billion.
Sector-wise, the largest contributor to M&A deal values was real estate, which has been the top contributor since 2016, with a 29% contribution to deal values and 23.6% in deal volume.
Duff & Phelps also notes that PE/VC investments in Singapore for 1H17 have recorded their highest value in terms of half-year performance at US$3.2 billion in value, doubling from US$1.6 billion in the same period a year ago.
Notable PE/VC investments over the latest period include that in Grab Taxi by SoftBank Group and other investors valued at US$1.5 billion, among other deals in the form of minority investments.
Meanwhile, Duff & Phelps says the Singapore IPO market has seen a sharp decline in value in 1H17 with 12 IPOs constituting US$300 million raised on the Singapore Exchange (SGX), compared to its seven IPOs in 1H16 which raised US$1.6 billion.
Srividya Gopalakrishnan, managing director, Duff & Phelps, notes robust growth in M&A and investment activity in the latest half of the year in spite of the negative outlook in certain sectors – which she attributes largely to Singapore’s contribution to deal values, driven by outbound transactions.
She also points out that Malaysia and Indonesia, too, have contributed to the overall growth in deal-making, although these countries’ deals were mainly driven by inbound investments.
“When we look at the outlook for the second half of the year, on one hand, the market sentiments are negative which is leading to uncertainty in deal making,” says Gopalakrishnan.
According to Gopalakrishnan, this is attributable to, among other factors: a slower pick up in oil prices, bad news coming from the shipping and marine sector, a lack of large acquisitions in the private sector, fewer IPOs, slowing growth in developing economies, as well as rapid and unprecedented changes in global regulations.
She does, however, note some positive trends emerging Southeast Asia which she believes could impact deal-making in 2H17 – such as more alternative investment funds or companies setting up a base or their Intellectual Property hubs in Singapore, and improved infrastructure in developing countries due to non-traditional sources of energy.
“While it will be interesting to see how deal making pans out for the rest of the year, we are hoping for a sustained level of momentum in overall deal values and a pick-up in private sector transactions and investments, going forward,” concludes the managing director.