SE Asian markets show uptick in M&A activity in 2019: Baker McKenzie report

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Southeast Asian countries showed uptick in deal activity despite a decline in M&A and IPO transactions in the Asia-Pacific region this year, according to a report by Baker McKenzie.

Vietnam, Thailand and Indonesia stood out in terms of M&As with total deal values already exceeding 2018 data by 29-44 per cent. Meanwhile, Singapore and Malaysia saw a big improvement in IPOs.

SE Asian countries are expected to be the biggest beneficiaries of the investment shift from China as a result of the current trade war. Also, each of these markets have a unique advantage such as a high annual GDP growth in Vietnam and fundamental economic factors in Thailand.

Thailand became the fastest growing M&A market in the region, from $7.5 billion in 2018 to $10.8 billion in 2019, driven by a robust economic performance. Furthermore, Hong Kong-based FWD Group’s purchase of $3-billion worth shares in Siam Commercial Bank’s insurance unit in July was the largest insurance M&A deal in Southeast Asia.

“Thailand remains attractive to investors due to the numerous opportunities in the market, as well as the ease of doing business in the country and its openness to trade,” said Theppachol Kosol, a capital markets and securitisation partner in Baker McKenzie’s Bangkok office.

The Southeast Asian kingdom country was followed by Vietnam, which saw M&A value grow about 37 per cent to $2.6 billion in 2019.

“Vietnam remains active in M&A right now, due to positive market factors and confidence that help create business opportunities, as well as multilateral agreements that continue to prompt regulatory reform,” said Seck Yee Chung, head of Baker McKenzie’s M&A practice in the country.

South Korean conglomerates were the largest acquirers, scoring two major deals including a $1-billion investment in Vingroup by SK Group and KEB Hana Bank’s acquisition of 15 per cent stake in the Bank for Investment and Development of Vietnam for $850 million

In Indonesia, notable transactions include MUFG Bank’s $3.5 billion acquisition of additional stake in Bank Danamon Indonesia, $1.1 billion merger between PT Bank Sumitomo Mitsui Indonesia and PT Bank Tabungan Pensiunan Nasional Tbk, and Michelin’s $700 million acquisition of PT Multistrada Arah Sarana Tbk.

These deals sent the total M&A value from $9 billion in 2018 to an estimated $11.6 billion in 2019.

The push for further infrastructure development as well as the need of state-owned companies to raise funds will continue to create a strong pipeline for deal-making activity in Indonesia, according to the report.

Looking ahead, these countries are predicted to follow global trend of a decline in M&A next year, plummeting around 33-42 per cent. However, the markets are expected to bounce back thanks to their strong market fundamentals and attractiveness to investors.

On the IPO front, only Singapore and Malaysia were exceptions amid the overall sluggishness, seeing transaction values jump 3.7x to over $2 billion and 4x to $621.5 million, respectively.

Other territories experienced significant declines in total IPO values, with even no deals occurring in Vietnam.

Asia Pacific deal-making cools off

Across the entire Asia Pacific region, M&A activity, which plunged to $634 billion in 2019 compared to almost $800 million a year earlier, is forecast to continue to decline another 18 per cent in 2020 to $529 billion. Listing activity will also likely repeat the slowing trend from $36 billion in 2019, which represented a 43 per cent decline from 2018, to dip further to $33 billion in 2020.

“The region’s weaker performance in 2019 can be attributed to a reduction in Chinese outbound deals due to government restrictions on outward investment. On a broader scale, this in turn may dampen economic momentum across Asia Pacific,” the report said.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.