M&A will be about cautious deal-making
Mergers and acquisitions activities in Singapore staged a late rally last year after a slow moving 2015, but whilst the sector’s outlook for 2017 remains generally positive, experts are telling cautionary tales.
The last twelve months saw a relative revitalisation of Singapore’s mergers and acquisitions (M&A) activities as firms entered into multiple transactions in the last quarter of 2016 that saw the highest increase in the sector’s activity since 2014. Figures over the past year have also increased on both deal value and volume.
With the rest of the Asia Pacific region poised to grow at a steady pace in 2017, deals involving Singaporean companies are expected not only to comprise the bulk of activities but also lead the way in dealing with fluctuations as policy changes loom. Analysts share that apart from big-ticket deals, there’s room for opportunities for relatively smaller but more realistic transactions.
Deal-making activity in Singapore gained momentum in 2016 when M&A transactions hit a record high worth US$93.4B, says Elaine Tan, senior analyst, deals intelligence, Thomson Reuters. She described 2016 as the “best annual period” of the sector in the last two years with the stream of deals that included sizeable increase in acquisitions involving sovereign wealth funds, amongst others. This is on top of the increase in outbound and domestic acquisitions.
Overall M&A activity in Singapore in 2016 grew 14% year-on-year (yoy) compared to 2015, reaching an overall value at US$71.3B, according to a Thomson Reuters report. This is on the back of the surge in deals closed in the fourth quarter of 2016 as the value of announced M&A involving Singaporean companies reached US$25B, a 38.8% sequential increase from Q3 2016 and 41.5% yoy increase from Q4 2015.
Preliminary findings from the report further stated that the average M&A deal size for disclosed deals in Singapore grew to US$126.2M, compared to the US$105.6M in
2015, as more transactions above US$1B were witnessed by Singaporean companies. “In the past year, Singapore companies and funds were active in outbound Singapore M&A as compared to previous years and this particularly dominated the market last year,” says Sheela Moorthy, partner at Norton Rose Fulbright’s Singapore office.
Total cross-border deal activity, meanwhile, amounted to US$34.5B in 2016, an 11.3% decline from the same period in 2015 (US$38.9B), according to the preliminary figures from Thomson Reuters. Singapore’s inbound
M&A activity slid 28.3% in deal value compared to 2015, although outbound M&A activity reached US$19.5B in 2016, up 8.8% in value from the preceding year. Domestic M&A activity grew to US$10.7B, up 18.3% in deal value from the comparable period last year.
Some of the most notable deals in 2016 that kept Singapore’s M&A scene afloat included activities involving government-owned corporations, sovereign wealth funds, and private corporations. “Singapore’s state investment
There will be continued interest in M&A deals but valuations may be lower as acquirers need to justify the acquisitions in a slowing worldwide economy.
Deal #1: In 2016 the Qatar Investment Authority bought Asia Square Tower 1, a world-class commercial development located in Singapore’s Marina Bay business and financial district, for S$3.4b. Photo from real estate consultancy JLL.
Deal #2: French shipping company CMA CGM assumed control of Singapore’s Neptune Orient Lines Ltd last June 2016. The deal, worth S$3.38b, was the largest acquisition in CMA CGM’S history. Photo from CMA CGM.