<article>Southeast Asia witnessed a 50% surge in the number of tech mergers and acquisitions (M&amp;A) involving homegrown startups in 2022, finds the latest report by DealStreetAsia &#8211; DATA VANTAGE.</article>

Southeast Asia witnessed a 50% surge in the number of tech mergers and acquisitions (M&amp;A) involving homegrown startups in 2022, finds the latest report by DealStreetAsia &#8211; DATA VANTAGE.
The momentum, which saw 176 deals inked last year, was driven by the fundraising highs achieved by privately held companies in the region in 2021, when they raised $23.2 billion in equity funding alone. Dealmaking was also bolstered by the successful public market debuts of major tech companies such as Bukalapak, Grab and GoTo, notes the <a href="https://www.dealstreetasia.com/reports/se-asia-tech-ma-review-2023">SE Asia Tech M&amp;A Review 2023</a>.
The report captures tech M&amp;A data for Southeast Asia from 2018 through May this year, including the impact of the COVID-19 pandemic on dealmaking in the region.
<figure id="attachment_346995" aria-describedby="caption-attachment-346995" style="width: 2560px" class="wp-caption aligncenter"><img loading="lazy" decoding="async" class="size-full wp-image-346995" src="https://media.dealstreetasia.com/uploads/2023/06/Teaser01-scaled.jpg?resize=640,281" alt="" srcset="https://media.dealstreetasia.com/uploads/2023/06/Teaser01-scaled.jpg?w=2560 2560w, https://media.dealstreetasia.com/uploads/2023/06/Teaser01-scaled.jpg?resize=300,132 300w, https://media.dealstreetasia.com/uploads/2023/06/Teaser01-scaled.jpg?resize=1024,449 1024w, https://media.dealstreetasia.com/uploads/2023/06/Teaser01-scaled.jpg?resize=768,337 768w, https://media.dealstreetasia.com/uploads/2023/06/Teaser01-scaled.jpg?resize=1536,673 1536w, https://media.dealstreetasia.com/uploads/2023/06/Teaser01-scaled.jpg?resize=2048,898 2048w" sizes="(max-width: 2560px) 100vw, 2560px" data-recalc-dims="1" /><figcaption id="caption-attachment-346995" class="wp-caption-text">Source: DATA VANTAGE</figcaption></figure>
<h3>No encore, but&#8230;</h3>
It is unlikely that this year will see a repeat of the strong tech M&amp;A performance seen in 2022. Investors have become more cautious – pessimistic, even – on the back of prevailing global economic woes, industry executives interviewed for the report said. The upcoming elections in Thailand and Indonesia are also expected to tame risk appetites across sectors.
That said, industry insiders believe that the so-called funding winter and the reset in startup valuations would further incentivise acquisitions and market consolidation in the next 12 to 24 months, particularly across major verticals such as fintech and e-commerce.
&#8220;With funding being more challenged, target companies are likely more reasonably priced&#8230; I suspect in 2022, and likely this year too, there will be more M&amp;A out of necessity and where prices will be more reasonable,&#8221; said Carmen Yuen, general partner at Vertex Ventures Southeast Asia &amp; India.
Regardless of economic cycles, M&amp;A is never out of fashion, said Yuen. Fintech and e-commerce, two of the most funded business verticals, will see more acquisitions as funding drags out, she added.
500 Global growth equity partner Saemin Ahn expects more deal activities involving companies offering hybrid agritech-fintech solutions for Southeast Asia.
&#8220;It’s also important for tech-enabled verticals like travel tech, general direct-to-consumer companies, to understand how to take the hybridization approach in a meaningful way to increase return on invested capital,&#8221; Ahn said.
Parthiv Rishi, a partner in the M&amp;A and private equity practice at law firm Sidley Austin, anticipates an increasing number of secondaries as investors in weaker financial positions and funds coming to the end of their life face increased pressure to return capital to their limited partners.
&#8220;This represents a good opportunity for well-capitalised private equity funds or strategics to capitalise on lower valuations to opportunistically acquire assets or increase their positions in existing portfolio companies, whether through additional primary and/or secondary investments. We are already seeing this trend play out, and we think this will continue to increase in activity,&#8221; he added.
<h3>Who is leading the acquisition tally?</h3>
As of the end of May, Southeast Asia had seen at least 56 tech acquisitions this year. This suggests the deal volume in 2023 will be comparable to 2021 and 2020.
The report identified nearly 650 tech M&amp;As in the past five years, of which 56% involved foreign acquirers. By foreign, the report refers to entities based in a different country than the target firm.
<figure id="attachment_346996" aria-describedby="caption-attachment-346996" style="width: 2560px" class="wp-caption aligncenter"><img loading="lazy" decoding="async" class="size-full wp-image-346996" src="https://media.dealstreetasia.com/uploads/2023/06/Teaser02-scaled.jpg?resize=640,269" alt="" srcset="https://media.dealstreetasia.com/uploads/2023/06/Teaser02-scaled.jpg?w=2560 2560w, https://media.dealstreetasia.com/uploads/2023/06/Teaser02-scaled.jpg?resize=300,126 300w, https://media.dealstreetasia.com/uploads/2023/06/Teaser02-scaled.jpg?resize=1024,431 1024w, https://media.dealstreetasia.com/uploads/2023/06/Teaser02-scaled.jpg?resize=768,323 768w, https://media.dealstreetasia.com/uploads/2023/06/Teaser02-scaled.jpg?resize=1536,646 1536w, https://media.dealstreetasia.com/uploads/2023/06/Teaser02-scaled.jpg?resize=2048,861 2048w" sizes="(max-width: 2560px) 100vw, 2560px" data-recalc-dims="1" /><figcaption id="caption-attachment-346996" class="wp-caption-text">Source: DATA VANTAGE</figcaption></figure>
Acquirers based in the United States led the pack, inking 75 deals. Singapore ranked second with 65 deals, followed by Greater China, India and Japan with 34, 25, and 25 deals, respectively.
The number of foreign acquisitions made by Singaporean firms experienced a significant surge from 12 in 2021 to 32 in 2022. About 62.5% of their targets were Indonesian companies, especially in fintech and financial services.
<figure id="attachment_346997" aria-describedby="caption-attachment-346997" style="width: 2560px" class="wp-caption aligncenter"><img loading="lazy" decoding="async" class="size-full wp-image-346997" src="https://media.dealstreetasia.com/uploads/2023/06/Teaser03-scaled.jpg?resize=640,276" alt="" srcset="https://media.dealstreetasia.com/uploads/2023/06/Teaser03-scaled.jpg?w=2560 2560w, https://media.dealstreetasia.com/uploads/2023/06/Teaser03-scaled.jpg?resize=300,130 300w, https://media.dealstreetasia.com/uploads/2023/06/Teaser03-scaled.jpg?resize=1024,442 1024w, https://media.dealstreetasia.com/uploads/2023/06/Teaser03-scaled.jpg?resize=768,332 768w, https://media.dealstreetasia.com/uploads/2023/06/Teaser03-scaled.jpg?resize=1536,663 1536w, https://media.dealstreetasia.com/uploads/2023/06/Teaser03-scaled.jpg?resize=2048,884 2048w" sizes="(max-width: 2560px) 100vw, 2560px" data-recalc-dims="1" /><figcaption id="caption-attachment-346997" class="wp-caption-text">Source: DATA VANTAGE</figcaption></figure>
Among sectors, fintech and e-commerce saw the most acquisitions in the past five years. Meanwhile, the digitisation of business processes continues to drive demand for companies providing enterprise solutions for software and web development, ICT infrastructure and data analytics.
Conversational AI, decentralised finance and blockchain-powered technologies are among the emerging sectors for M&amp;A in recent years, according to the report.
<h3>Greener pastures</h3>
On the back of rising awareness of climate change and sustainability, industry insiders predict a surge of interest in green investments in the next 12 to 24 months. Backed by strong government support, sectors such as renewable energy, electric mobility, foodtech and precision agriculture are expected to see more deals, they said.
&#8220;Apart from the renewable energy sector, which has seen much interest from MNCs seeking to use acquisitions and divestments … we expect to see more interest in next-gen sustainability solutions like alternative proteins and EVs,&#8221; said Siew Kam Boon, co-head of private equity practice at law firm Dechert LLP.
Players in major EV markets, such as the US and Europe, are seeking to diversify their supply chains. This, she said, should benefit countries such as Thailand and Indonesia, which have leveraged their manufacturing bases to emerge as attractive investment destinations.
<figure id="attachment_346998" aria-describedby="caption-attachment-346998" style="width: 2560px" class="wp-caption aligncenter"><img loading="lazy" decoding="async" class="size-full wp-image-346998" src="https://media.dealstreetasia.com/uploads/2023/06/Teaser04-scaled.jpg?resize=640,285" alt="" srcset="https://media.dealstreetasia.com/uploads/2023/06/Teaser04-scaled.jpg?w=2560 2560w, https://media.dealstreetasia.com/uploads/2023/06/Teaser04-scaled.jpg?resize=300,134 300w, https://media.dealstreetasia.com/uploads/2023/06/Teaser04-scaled.jpg?resize=1024,456 1024w, https://media.dealstreetasia.com/uploads/2023/06/Teaser04-scaled.jpg?resize=768,342 768w, https://media.dealstreetasia.com/uploads/2023/06/Teaser04-scaled.jpg?resize=1536,684 1536w, https://media.dealstreetasia.com/uploads/2023/06/Teaser04-scaled.jpg?resize=2048,913 2048w" sizes="(max-width: 2560px) 100vw, 2560px" data-recalc-dims="1" /><figcaption id="caption-attachment-346998" class="wp-caption-text">Source: DATA VANTAGE</figcaption></figure>
&#8220;We have been hearing a lot more intentions to invest in all things sustainable, climate and net zero. Longevity seems to be talked about more regularly too. I believe there will be interest to discover companies within these spaces,&#8221; said Vertex&#8217;s Yuen.
<h3>Prevailing concerns</h3>
While Southeast Asian markets are becoming more attractive as investment destinations, restrictions on foreign ownership, capital structure, and fund remittance in parts of Southeast Asia remain a concern for investors.
&#8220;Many SE Asia jurisdictions also mandate filings under their applicable antitrust and competition rules and regulations for transactions which exceed certain quantitative thresholds. These jurisdiction-specific features can impact due diligence processes, transaction certainty and transaction pricing,&#8221; Rishi said.
While foreign ownership restrictions are not likely to go away, much progress has been made in Indonesia, the Philippines and Vietnam at a time when other parts of the world have begun adopting more protectionist measures.
&#8220;Indonesia had, in a major investment reform, replaced its existing &#8220;negative investment list&#8221; with a &#8220;positive investment list&#8221;, the general principle of which is that a business sector is open to 100% foreign investment unless it is subject to specific limitations. Foreign investment restrictions have been significantly reduced from 350 to only 46 business fields,&#8221; Boon said.
Nathaniel Mangunsong, managing director at Indonesian law firm Adrem Law, expects to see a level of policy continuity when President Joko Widodo&#8217;s replacement steps into office next year.
&#8220;We would still expect a similar or more level of M&amp;A activities even within the election cycle, but we are optimistic that things will take off further after the election and also with hopefully a better climate of the global economy, especially in the tech space,&#8221; he said.
<hr />
The <a href="https://www.dealstreetasia.com/reports/se-asia-tech-ma-review-2023">SE Asia Tech M&amp;A Review 2023</a> report covers M&amp;A transactions by homegrown tech companies in Southeast Asia. It captures:
<ul>
<li style="font-weight: 400;" aria-level="1">M&amp;A deal volume across quarters and countries</li>
<li style="font-weight: 400;" aria-level="1">Analysis of M&amp;A trends across markets and sectors</li>
<li style="font-weight: 400;" aria-level="1">Top deals across markets and sectors based on identified value</li>
<li style="font-weight: 400;" aria-level="1">Investor perspectives, and more.</li>
</ul>
The report is available exclusively to DealStreetAsia – DATA VANTAGE subscribers. <a href="https://www.dealstreetasia.com/user/plans">Subscribe/upgrade your subscription</a> now to access our entire set of reports.

Deepshikha Monga

Southeast Asia witnessed a 50% surge in the number of tech mergers and acquisitions (M&A) involving homegrown startups in 2022.

SE Asia tech M&A seen cooling down after sizzling hot 2022

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SE Asia tech M&A seen cooling down after sizzling hot 2022

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