Singapore sees slow start to M&A activity: Thomson Reuters

THE mergers and acquisition (M&A) scene in Singapore is witnessing its slowest start since the first quarter of 2013.

According to data compiled by Thomas Reuters, the value of announced M&As involving Singaporean companies reached US$7.7 billion in the first three months of this year, down 21.0 per cent from the US$9.7 billion seen in the same period in 2016. Announced deals fell 38.1 per cent to 146, from 236 a year ago.

"This is the slowest start for overall Singapore M&A activity in terms of value since first quarter of 2013,'' Thomas Reuters said.

The average size for disclosed deals grew to US$88.1 million compared to US$69.3 million in the first quarter of 2016, as activity involving Singaporean companies this year witnessed more deals above US$500 million compared to the same period last year.

The property sector took the lead and accounted for 41.9 per cent of the market share worth US$3.2 billion. This is up 253.1 per cent in terms of deal value from the first quarter of 2016, making it the highest-ever first quarter period for the sector since 2015. The sector got a boost from the US$1.04 billion purchase of 60 Wall Street, an office tower in New York, by a joint venture between Singapore sovereign wealth fund GIC and Paramount Group.

Energy and power sector followed with 14.2 per cent market share, totalling US$1.1 billion so far this year, up 523.3 per cent in terms of deal value from a year ago. Consumer products and services took 11.3 per cent of the market share, at US$865.5 million, up 3.5 per cent from the first quarter of 2016.

Private equity-backed M&A in Singapore fell 90.1 per cent from Q1 2016. Buyside Financial Sponsor M&A activity in Singapore saw US$35.0 million worth of deals so far this year, down 90.1 per cent in deal value from Q1 2016. This is the lowest first quarter period in terms of deal value since 2014.

Inbound M&A fell 40.0 per cent, its lowest since 2013. Foreign acquisitions targeting Singapore-based companies reached US$1.0 billion so far this year, a 40.0 per cent decrease in deal value compared to Q1 2016.

"This is the lowest start to a year since 2013 when deal value for inbound acquisitions in Singapore reached US$910.8 million,'' Thomas Reuters said.

The property sector accounted for 46.1 per cent of Singapore's inbound M&A activity. This was driven by Canada-based Manulife Financial Corp's acquisition of all of DBS China Square, a Singapore-based lessor of non-residential buildings, from DBS Bank for a total US$252.0 million (S$358 million) in cash. The transaction also included PwC Building, a 28-storey office building.

Hong Kong is the most active buyer in terms of deal value and captured 40.9 per cent of the inbound acquisitions in Singapore. Canada and United States followed next.

Singapore outbound M&A totaled US$3.8 billion in Q1 2017, down 26.8 per cent in deal value after coming off a strong start in the first quarter of 2016. Again, the property sector is the most targeted sector thus far, capturing 58.1 per cent of Singapore's outbound activity with US$2.2 billion worth of deals.

The United States is the most targeted nation for Singaporean overseas deals, with US$1.8 billion worth of transactions so far this year, or 48.3 per cent market share. This was bolstered by Temasek Holdings's acquisition of an undisclosed minority stake in Verily Life Sciences LLC, a United States-based provider of biotechnology research and development services, for a total US$800 million, in a privately negotiated transaction.

In terms of advisory fees from completed transactions in Singapore, that hit US$71.4 million so far this year, up 158.1 per cent from a year ago. Morgan Stanley takes the lead in the fee rankings for completed M&A deals in Singapore with US$21.0 million in related fees, capturing 29.4 per cent wallet share in Q1 2017.