More M&A appetite likely this year, but Singapore may buck the global trend: KPMG

LARGE global corporates are expected to show greater appetite for mergers and acquisitions (M&As) this year, and will likely have more capacity to fund these prospective transactions, a KPMG report on Thursday showed. But Singapore is expected to see a dip in acquisition appetite, the report noted.

The auditing firm looked at the predicted forward price-to-earnings (P/E) ratio as one measure of corporate appetite, and found that this has grown 7 per cent over the past year, overall.

Meanwhile, the ability to fund transactions - as measured by forecast net debt-to-Ebitda (earnings before interest, tax, depreciation and amortisation) - is expected to improve 14 per cent over the next year, with the largest companies paying down debt and stockpiling cash.

Said Vishal Sharma, KPMG's Asia-Pacific head of M&A: "The data indicates a return of confidence in the M&A markets. We are seeing an upswing after almost three years of decline."

Singapore's forward P/E ratio dropped 3 per cent, making it the only country in South-east Asia to see a fall in its ratio.

"The drop in Singapore's forward P/E ratio is a reflection in some ways of the global concerns around rising interest rates and weak growth expectations from the large economies of China and Japan," said Mr Sharma.

"Singapore, being an open economy, feels the effects of these likely headwinds faster than some of the other economies such as Thailand, Malaysia and the Philippines."

The KPMG report is produced bi-annually, using data from 1,000 of the largest companies in the world by market capitalisation. The financial services and property sectors are excluded from its analysis.