Singapore 2015: The year of M&A with 90% uptick in deal value; Temasek & GIC corner a third of pie

For Singapore, 2015 has been the ‘year of M&A’. The city-state witnessed close to 90 per cent increase in total deal values, including private equity and venture capital transactions, and doubling of M&A values in 2015 over 2014.

According to data compiled by corporate finance advisor Duff & Phelps, Singapore recorded a total of 685 deals (M&A, PE/VC and IPOs) worth $103.8 billion for 2015, a significant jump in transaction value compared to $55.4 billion for 2014.

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“The rationale for such high level of deal activity have been the lower interest rates and the expectations of the same going up, coupled with the pick-up of economic activity in the US and sluggish growth in several other markets driving them towards inorganic growth, where organic growth is limited. We are also witnessing a considerable increase in the confidence level of Singapore companies as they start viewing the world as their global market and acquire large businesses across the world, which has led to this year seeing the outbound deal values more than double compared to last year,” explained said Srividya Gopalakrishnan, managing director of Duff & Phelps.

If only M&A numbers are evaluated, then Singapore saw 591 deals during the year, valued at $101.2 billion, compared to $50.7 billion in 2014, with outbound deals accounting for more than 80 per cent of the total transacted value compared to 63 per cent in 2014, followed by domestic deals which contributed to just 8 per cent of the total deal value compared with 24 per cent in 2014, while inbound deals accounted for only 7 per cent of total transacted value.

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During the same period, Singapore also saw 81 private equity and venture capital investments amounting to approximately $2.2 billion & 13 IPOs valued at around $450.7 billion.

But a closer examination of Singapore’s figures reveals that deal making over the past 12 months bears close resemblance to the state of its economy, which slipped into technical recession in Q3 2015, and is slowing this year to its lowest rate of growth in six years.

This is illustrated by the fact that inbound deals and domestic deals accounted for only15 per cent of all mergers and acquisitions in the city-state.

Singapore’s numbers have also been propped by a slew of factors, including the fact that some of the global MNCs are incorporated here, or have a dual listing on the local exchange, which technically enables the deals they enter into to be counted here.

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For instance, Singapore deal value numbers received a massive boost in 2015 from Avago Technologies Ltd’s acquisition of wireless chipmaker Broadcom Corp for $37 billion, in what is the second largest tech deal in 2015, after the Dell-EMC merger.

Boradcom, a Fortune 500 company is based in California and listed on Nasdaq, but the company is Singapore-incorporated largely for tax breaks. Last year, the company had even moved some of its Singapore operations to Ireland, after some of the tax incentives it enjoyed in the city-state come to an end in March 2014.

Similarly several startups across Asia, as well as newly established majors companies, including India’s largest e-commerce player Flipkart are incorporated in Singapore.

Asked on Broadcom adding to Singapore’s numbers, Gopalakrishnan said even if that transactions were to be excluded, the city-state’s M&A scene in 2015 would still be comprehensively larger in volumes and value when compared to the previous year.

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In 2015, there were 407 cross-border M&A deals in Singapore registering $93.3 billion, representing a substantial increase in deal value of 146.2 per cent from $37.9 billion in 2014.

The overall increase in cross-border M&A deals for Singapore is reflected in both inbound and outbound M&A deal values which have increased 58.4 per cent and 157.2 per cent respectively.

The bulk of total deal value came from 279 outbound deals – Singapore-based companies acquiring overseas companies – worth $86.6 billion contributing to over 92.8 per cent of the total deal value in 2015 for total cross border deals compared to 88.9 per cent in 2014.

The US accounted for 59.7 per cent of all outbound deal value, and 45 per cent  in volumes, making it the preferred destination for Singapore companies

Domestic deals contributed to 7.8 per cent of total M&A deal value with 184 deals valued at $7.8 billion, data compiled by Duff & Phelps reveal.

Temasek, GIC accounts for a third of Singapore’s M&As

Another factor that is perhaps unique to Singapore’s M&A scene is that a third of all M&A deals (in value) were undertaken by its state fund Temasek Holdings, and its sovereign wealth fund, GIC, picking up stakes and buying companies around the world.

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Five of the top 10 deals from the city-state in 2-15 involved either Temasek or GIC directly. The Singpore funds were also indirectly involved in two of the top 10 deals – Global Logistics Properties, which had acquired US Logistics portfolio for $4.5 billion, is majority owned by GIC, while Kintetsu World Express bought out Temesek controlled APL Logistics.

Post-acquisition, GLP will be the second largest logistics property owner and operator in the US. GLP is also the largest provider of logistics facilities in China, Japan and Brazil. For GIC-controlled GLP, the 2015 acquisition follows the earlier $8.1 billion acquisition of Indcor Properties last year.

Similarly in 2014, Temasek and GIC were involved in five of the top eight billion – dollar-plus deals with the acquisitions of US-based IndCor Properties Inc from Blackstone Group LP, and stakes in SGX – listed Olam , consumer retailer AS Watson Holdings, among others.

Technology takes top slot

This year also marks the first time that technology has taken the top slot, both in terms of M&A transactions and well as PE deals. This has been led by Singapore funds – Temasek and GIC – gradual shift to this asset class, when compared to their earlier preferences for sectors such as real estate, retail and banking and insurance services.

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“The largest contributor to M&A deal values in Singapore was the technology sector, contributing approximately 51.0 per cent to the deal values, while the real estate sector contributed the most to deal volume, accounting for over 21.8 per cent of the deal volume in Singapore with a total of 129 deals. Based on M&A deal values, the top performing sectors were Technology, Real Estate, and Banking & Financial Services accounting for 74.9 per cent of the overall deal M&A value in Singapore,” added Duff Phelps’s Srividya Gopalakrishnan.

Singapore’s deal numbers dwarf its neighbours

In 2015, Singapore, Malaysia and Indonesia recorded a total deal activity valued at $115.4 billion spread across 1,118 deals.

Taking all three countries together, this marks a robust increase from the same period last year which saw total deal activity valued at $74.0 billion spread across 732 deals. Regionally, between Singapore, Malaysia and Indonesia, there had been a total of 70 intra-regional M&A deals, worth over $900 million.

PE/VC investments remain stable

Private equity and venture capital deals in Singapore companies this year have remained relatively stable in value terms at $2.2 billion, but showed higher deal activity with a total of 81 deals, compared to 47 deals in 2014.

The largest PE/VC investment for Singapore in 2015 was GrabTaxi Holdings Pte Ltd’s fund raising round of $350 million from investors such as China Investment Corporation and Coatue Management, LLC.

Other notable PE/VC deals for 2015 include Standard Chartered Private Equity’s $52.0 million investment into Crystal Jade Culinary Concepts and PropertyGuru’s $129.5 million investment round from investors such as TPG Capital Management LP, Emtek Group and Square Peg Capital.

Also Read:

Indonesia 2015: M&A deal volumes see uptick but values crash over 200% to $1.57b

Vietnam 2015: Homegrown Vingroup, Masan show robust deal appetite, corner one-third of region’s M&As

Deals-driven hedge funds post lacklustre returns despite M&A boom in 2015

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.