Singapore M&A dealflow down 61% for 1H 2015

Credit: Lean Accountants

M&A in Singapore has seen a sharp decrease, with deal flow volume involving Singapore companies reaching $21.4 billion year-to-date, a 61.3 percent decline compared to 1H 2014, which saw $55.2 billion worth of deals being transacted, according to data from a Thomson Reuters report on 2014 M&A activity.

<em><strong>Credit: </strong></em><a href="http://www.thomsonreuters.com/" target="_blank"><strong>Thomson Reuters</strong></a>
Credit: Thomson Reuters

Deal value fell saw a sharp decline in 2Q 2015, amounting to $7.8 billion, a 43 per cent reduction from 1Q 2015 and a 68.3 per cent reduction when compared to 2Q 2014.

Meanwhile, the total volume of cross-border deal activity amounted to $12.8 billion, a 61.8 per cent decline compared to 1H 2014, which saw deals totalling $33.4 billion in value.

This was driven by declining deal value from outbound M&A activity, which dropped 78.1 per cent, while inbound M&A activity reached $6.8 billion, a 9.8 per cent increase compared 1H 2014. Domestic M&A activity has also declined to $4.4 billion, a 68.4 per cent decrease in deal value from 1H 2014.

Vishal Thapliyal, a partner at PwC Corporate Finance Singapore, commented: “Last year, Singapore had a lot of real estate deals. This year, you are likely to see fewer of these deals. Last year, a lot of the real estate deals were privatisations. A lot of those that had to happen have happened. So maybe this year, you won’t see so many.”

Thapliyal added, “The second thing is, you will see that there is a fair bit of regulatory pressure on banks, and there is a lot of focus on compliance and regulatory issues at the moment.”

Industry observers have noted that steep declines being seen are most probably caused by global macroeconomic uncertainty. Given that Singapore is an open economy and is vulnerable to external market shocks. With this in mind, the deal flow should pick up in 2H 2015 and 1H 2016, amid growing opportunities in the region and greater economic integration.

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M&A breakdown

The majority of the deal making involving Singapore firms was targeted at the energy and power sectors, which accounted for 23.4 percent of the market.

The Israel Corporations divestment of its Kenon Holdings unit for $3.2 billion (including net debt), to its shareholders pushed overall M&A activity targeting energy & power to $5.0 billion, a 98.6 percent increase compared 1H 2014. Meanwhile, real estate sector dominated the market in 2014 during the same period.

But 1H 2015 has seen real estate M&A come in second, accounting for only 22.9 percent of the market, with deals totalling $4.9 billion in value. This is a reduction of 72.5 percent compared to last year. Private equity-backed M&A deals also decline by 85 percent, with 1H 2015 having seen only $186.1 million worth of such deals so far, a significant decline from a 1H 2014 value of $1.2 billion.

This marks the lowest first half period in terms of deal value since 2013, which saw $83.3 million worth of deals being concluded.

The largest deal to date in 2015 involved a consortium comprising Elang Mahkota Teknologi, Square Peg Capital and TGP Capital Partners acquiring a minority stake in PropertyGuru, a real estate portal operator, for $129.44 million, earlier in June 2015. PropertyGuru offers property sales in Singapore, Thailand and Indonesia, with transactions within the portal reaching $2.98 billion in FY 2014.

However, inbound M&A has increased by 10 percent, with foreign acquirers targeting Singapore-based firms, with deals worth $6.8 billion so far in 2015, a 9.8 percent increase in deal value compared to 1H 2014 and the highest first half period since 2008. 1H 2008 saw deal value for inbound acquisitions reach $9.6 billion.

The largest investor was Japan, which announced the largest number of deals targeting Singapore. Japan-based acquirers accounted for 16 transactions worth $1.2 billion, a 7.8 percent increase from over a year ago. Kintetsu World Express of Japan acquired the entire share capital of APL Logistics Ltd from Neptune Orient Lines for $1.2 billion.

Outbound M&A has decline by 78 percent, its lows volume since 2009, when overseas acquisitions generated $608.7 million of value. Singapore firms have slowed down their overseas acquisitions for 2015. Outbound M&A deals for 1H 2015 are valued at $6 billion, a 78.1 percent decrease in deal value compared to 1H 2014 which saw $27.2 billion worth of deals.

In terms of deal value, the United Kingdom is the most targeted nation, accounting for $1.1 million worth of transactions or 17.7 percent of outbound M&A activity from the city-state. The United States was in second place, with 13.8 percent market share worth $821.6 million, a 17.3 percent reduction from 1H 2015.

For 1H 20China saw the most number of acquisitions from Singapore with 19 announced deals so far this year worth US$246.4 million.

Commenting on the current situation in the M&A space, Harsha Basnayake, ASEAN managing partner for Transaction Advisory Services at EY, explained, “Sitting in Southeast Asia, we are probably among the best in the emerging market space, there are lots of opportunities with the ASEAN Economic Community taking shape at the end of this year.”

Basnayake added, “A lot of MNCs are looking at Southeast Asia as an opportunistic play. Singapore has always benefited from the fact that the hinterland that it has got is very close and it is been very easy for them to do business in. So the expansion opportunity and consolidation opportunity in this region provide a massive platform for Singapore to succeed.”

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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.