Indonesia saw its mergers and acquisitions (M&A) deal value surging to $4 billion in the first half of 2017, recording about 100 per cent increase from the same period last year, a report by Duff & Phelps says.
Notable deals included Tencent Holdings’ $1.2 billion investment in Indonesia’s unicorn Go-Jek, which was not only the largest in Indonesia, but also led the region by being slightly bigger than Alibaba’s $1 billion investment in Lazada investment. Go-Jek also made headlines last year when it received $550 million from KKR and Warbug Pincus.
Malaysian firm Felda Investment Corporation’s minority stake acquisition in Eagle High Plantations ($500 million) was the second largest deal followed by BP’s investment into Tanggung LNG Project ($313 million), Waskita Toll’s minority buyout by Taspen and Sarana Multi Infrastruktur ($262 million), and Baskhara Utama Sedaya’s acquisition by Astra International ($260 million).
Of the total 81 M&A deals, technology was the largest sector in value terms (32 per cent), followed by agriculture (17 per cent), industrials (16 per cent), and energy (6 per cent).
Indonesia recorded a total of 118 deals across M&A, private equity, venture capital, and IPOs worth $4.7 billion during the first half of this year. Meanwhile, its neighboring Malaysia and Singapore reported 256 and 485 deals respectively, with a total deal value of $9.4 billion and $42.6 billion respectively.
Srividya Gopalakrishnan, managing director of Duff & Phelps, said the region has shown a “robust growth”, despite the negative outlook in certain sectors.
“Corporates and funds have been opportunistic in tapping into the global markets, leveraging low valuations in certain sectors and high growths in certain other sectors,” Gopalakrishnan said in a statement.
“Singapore has contributed to a significant part of the deal values, driven by outbound transactions, while Malaysia and Indonesia have contributed to the growth in deal making, driven by inbound investments,” she added.
In the PE/VC space, Indonesia’s largest deal was the fifth in the region — GIC’s $261 million investment into Nusantara Sejahtera Raya. The country’s largest IPO was the sixth, with Kirana Megatara raising $40 million via its IPO on the IDX in June.
Going forward, Gopalakrishnan predicts that it won’t be all rainbows for these markets. She has a view of negative market sentiments for the second half of they year, which will lead to uncertainty in deal making.
“This is attributable to slower pick up in oil prices, a steady stream of bad news coming from the shipping and marine sector, a lack of large acquisitions in the private sector, a reduced number of IPOs, slowing growth in developing economies, and rapid and unprecedented changes in global regulations among other factors,” she warned.
On the other hand, markets can expect ongoing positive trends in M&A deal volumes and value, PE/VC investment, and a strong IPO pipeline for the second half.
Indonesia, for one, is predicted to be having its “busiest year for IPOs in at least a decade”, as observers are saying. There have been 18 companies that have sold shares to the public during the first half of 2017. At this rate, the IPO stream would outpace 2013, when 30 companies sold shares to the public.
Speaking to The Business Times, Harry Su, head of strategy and research at Bahana Securities in Jakarta, said he expects at least another six IPOs to follow during the second half. Most of these will be from state-owned enterprises including GMF AeroAsia, the aircraft maintenance provider of the country’s government-controlled carrier Garuda Indonesia.
“It’s been very busy and the second half will be busy, too,” Su said.
Indonesia concluded 2016 with 131 deals worth $8.5 billion, or a 400 per cent increase in value compared to $1.5 billion in the previous year when it saw 105 transactions. The country had seen a major crash the year before, with M&A deal value falling to $1.57 billion compared to over $5 billion in 2014.