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M&A appetite of Singapore firms dips as they pursue revamp

EY survey finds 40% of S'pore execs plan on acquisitions in next 12 months, down from 52% six months ago

Singapore

M&A APPETITE among Singapore and South-east Asian companies has dipped, says Ernst & Young (EY) in its 18th Global Capital Confidence Barometer.

The biannual survey of 2,500 executives across 43 countries found that 40 per cent of Singapore executives plan on pursuing acquisitions in the next 12 months, down from 52 per cent six months ago.

This decline can be attributed to companies' current intentions to restructure; according to the survey, 83 per cent of Singapore executives see portfolio transformation as the most prominent boardroom issue.

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"We've seen that companies have really realised that you need to focus on a few things that you can do well and make a lot of money in, and get rid of the stuff that doesn't make sense," said Vikram Chakravarty, Asean managing partner for advisory services at EY, during the launch of the survey's Singapore-specific results on Monday.

"In Singapore, there are a lot of divestments playing out right now, and we expect the larger deals to come through. We can't comment on some of these because they are not public yet, but many of them are overseas deals," he added.

The main driver of this is technology adoption.

Capital gained from divestments will be invested in new technology which is expected to boost productivity.

Cloud computing and big data are prominently featured in 34 per cent of the Singapore respondents' boardroom agendas, while 33 per cent focus on distributed ledger technology such as blockchain.

Contrast that with the 21 per cent of SEA companies focusing on AI and robotic process automation; none of the surveyed Singapore firms are focusing on such technologies.

As the adoption of new technologies increases, close to two-thirds of local and SEA companies (63 per cent and 64 per cent respectively) indicate that they are struggling to hire people with the right skills.

Singapore's technological opportunities are also attracting both local and overseas investors.

The top investment destinations among Singapore respondents are Singapore, Malaysia, China, Japan and Australia.

Meanwhile, Singapore is the second most popular investment destination among SEA respondents, with Malaysia being the most popular.

Another area with potential growth is infrastructure, with 97 per cent of local respondents expecting government investment in infrastructure to increase over the next 12 months.