Singapore has seen a drop in M&A in 2015, with declines in both overseas acquisitions and domestic activity for the city-state.
However the capacity to fund M&A growth is expected to rise 15 per cent in 2016 among Singapore-based companies, according to Benjamin Ong, head of mergers & acquisitions and capital advisory at KPMG Singapore
In 2015 overall activity plummeted by 35.9 per cent in deal value from the previous year’s record annual volume. Financially fit, Singapore companies are positioned to pursue M&A deals. The unified ASEAN Economic Community, is poised to boost Singapore M&A activity in 2016.
Contrasting with Singapore’s decline in M&A activity last year, Asia Pacific (APAC) deal making hit the $1 trillion mark in 2015, driven by conglomerate restructurings, divestments, reverse takeovers and acquisitions overseas.
The APAC region also witnessed a wave of mega deals over $5 billion, the highest percentage since 2000. As such, M&A is likely to be high in 2016, driven by further technological disruption pursuing companies to form strategic acquisitions, among other M&A strategies.
Chinese companies in the industrial and tech sectors are looking for deals overseas in order to improve quality of manufacturing and environmental standards. However, such transactions have faced obstacles of a political nature.
The capacity of corporates to fund M&A growth is expected to rise by 13 per cent. Healthy balance sheets and strong liquidity in debt markets provide optimism, juxtaposing increased uncertainty felt towards the Chinese and global economy, increase in US interest rates and oil price depression. But economic slowdown could also lead to the provision of new M&A opportunities in the region.
Growth through acquisition, divesting underperforming assets and industry consolidation in the APAC region has seen a 55 per cent increased from 2014 to 2015.
China outbound activity accrued $76.5 billion worth of deals, through purchasing European and North American assets to counter losses in domestic growth levels. China’s slowdown did not seem to dampen its M&A appetite for Singapore and southeast Asia as it was the largest investor in the region.
The APAC outpaced Europe in terms of value and percentage of total M&A for the first time in history. Despite the presence of supportive factors (i.e. Chinese capital) some analysts expressed doubt over whether M&A deal flow and activity in 2016 can surpass or even repeat the highs in Asia Pacific M&A activity observed in 2015.