Dismal first half year for Singapore's M&A scene

Singapore

MERGERS and acquisitions (M&A) in Singapore slumped during the first six months of this year, in line with regional and global trends, according to data from M&A intelligence service Mergermarket.

The Republic's total deal value fell 25.9 per cent to US$11.88 billion while the number of transactions shrank by about a third to 41, Mergermarket told The Business Times (BT). In H1 2019, Singapore recorded US$16.03 billion from 64 deals.

The bulk of Singapore's activity in the first half of the year was on account of CapitaLand Commercial Trust's US$8 billion merger with CapitaLand Mall Trust, "which was an extension of the consolidation" in the real estate investment trust sector, Riddhima Saxena, Mergermarket's emerging markets editor, told BT.

From January to June this year, the biggest M&A transactions involving Singapore target firms also included Mitsubishi UFJ Financial Group's (MUFG) US$706 million investment into Grab. Yinson's rescue deal for Ezion made the list as well; part of the package involves 23 billion new shares issued to Yinson at 3.17 Singapore cents apiece, giving the Malaysian fiirm an 86.08 per cent stake in Ezion's enlarged share capital.

Despite the slowdown, Singapore was still South-east Asia's biggest M&A market by value in H1 2020.

Thailand was the second-largest market in the region, with US$11.1 billion across 18 deals. This deal value was largely driven by Thai conglomerate CP Group's US$10.6 billion acquisition of British groocery chain Tesco's businesses in Thailand and Malaysia. The acquisition marked the largest deal in the Asia-Pacific for the first half of the year.

Overall, South-east Asia's M&A activity generated some US$29 billion across 149 deals in H1 2020, most of which were done in the first quarter.

This was 12.5 per cent lower by value compared with the year-ago period, which clocked US$33.1 billion in 186 deals.

The decline in dealmaking activity came despite the region recording its highest first-quarter deal value on Mergermarket record (since 2001), as the novel coronavirus pandemic's impact on M&A activity fully emerged only in the second quarter.

In the first three months of the year, South-east Asia saw 86 deals totalling US$25.2 billion, before dealmaking "ground to a halt" in April and May as several countries were put under strict lockdowns in response to the Covid-19 outbreak, Mergermarket said. In Q2, there were 63 deals amounting to a mere US$3.8 billion.

Mergermarket added that the second half of this year could continue to see subdued activity, as corporates are expected to retain higher amounts of cash on their balance sheets to weather the uncertain economic conditions.

That being said, Singapore and Vietnam in particular are showing signs of recovery, with talks on potential deals picking up, Ms Saxena told BT.

South-east Asia's M&A market in H1 2020 was dominated by strong intra-regional activity, which totalled US$23.9 billion across 85 deals. This is a 20.2 per cent increase in deal value from a year ago.

However, inbound dealmaking plunged by 61.7 per cent by value to US$5.1 billion from 64 deals, down from US$13.2 billion across 88 deals in the first half of last year.

Singapore had the highest inbound M&A value in the region, with US$2.7 billion across 27 deals, boosted by MUFG's Grab deal.

Vietnam came in second, bringing in US$872 million in overall inbound investment, driven by Vinhomes' US$651 million investment from a consortium that included KKR and Temasek Holdings.

In contrast to the drop in inbound activity, outbound activity from South-east Asia stayed robust despite the Covid-19 crisis, with US$15.1 billion across 49 deals. By value, this is about 62 per cent higher than H1 2019's US$9.3 billion in 71 deals.

The pharmaceutical, medical and biotech sector topped the outbound deal list by value with US$5.8 billion from two deals. Real estate saw US$1.7 billion from two deals in H1 2020, almost 90 times the US$19 million in deal value a year ago.