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In investing, some things change; some stay the same

Technology has brought about change as S-E Asians go from 4 in 5 without Net connectivity to becoming the world's most engaged mobile Internet users.

Factors such as technology adoption, availability of capital and resources, an increase in population and economic growth will continue to boost transactions.

OVER the last few years, a lot has changed in the deal landscape involving mergers and acquisitions (M&A), private equity (PE) and venture capital (VC) investments in Singapore, Malaysia and Indonesia. As we have been working in and observing such transactions in the region in recent years, it is interesting to take a critical look at the key trends that have emerged - some changes were dramatic, some incremental and some things remain unchanged.

In our Transaction Trail Report - an annual analysis of transactions in the region - the reported value of US$70 billion worth of M&A, PE/VC investments and initial public offerings (IPOs) in 2013 nearly doubled to US$136 billion by 2018 and stabilised at close to US$100 billion in 2019.

Taking a closer look at the key trends:


It may be easier to start with the few aspects that have not changed much in recent years.

Composition of M&A transactions

  • Singapore continues to garner the lion's share of deal values in the region, especially for M&A transactions and PE/VC investments.
  • Outbound deals (Singapore companies acquiring overseas businesses) continue to be the larger proportion of Singapore's M&A transaction value, while Malaysia and Indonesia continue to have a larger proportion of inbound (overseas companies acquiring local businesses) and domestic (buyer and the target are both local) transactions.

Key drivers

  • Singapore's key value driver has been the multi-billion-dollar outbound investments made by the sovereign wealth funds, either individually or with co-investors. Continued government encouragement and support has motivated several Singapore companies to acquire or invest overseas to expand their global footprint.
  • In Indonesia, the key driver has been government regulations that led to divestment and consolidation, either directly or indirectly. This effect is particularly visible in sectors such as mineral and resources, as well as banking, financial services & insurance (BFSI).
  • Privatisation and delistings are an important trend that we observed over the recent years, where a PE fund or a strategic player and/or an existing controlling shareholder takes a public company private, with a view that significant value creation is possible post-privatisation.

Sector composition

  • While M&A value proportions from different industries and sectors change every year, we have observed some key sectors that continue to contribute significantly to the share of M&A values such as real estate in Singapore; energy and industrials in Malaysia; and materials and BFSI in Indonesia.
  • From an IPO listing perspective on the Singapore Exchange (SGX), real estate investment trusts (Reits) have been, by far, the largest contributors to capital raised over the years in Singapore, as the SGX continues to attract sizeable Reit listings with global assets.


The changes to deal-making and investing over the last few years can be mostly attributed to one factor - technology. Technology has been one trend that connects the dots across several other trends we have observed in the regional deal landscape.

This is not surprising considering how South-east Asians have gone from four in five people not having Internet connectivity to becoming the most engaged mobile Internet users in the world (360 million Internet users). Of these, 90 per cent them connect primarily through their mobile phones.

While M&A transactions have witnessed several technology sector transactions in recent years, a more notable impact was seen in the PE/VC investment space in the region. In 2019, transaction value increased to nearly US$10 billion, from US$3.2 billion in 2013. A significant proportion of this increase has been from VC investments with an increased focus on new economy sectors, primarily technology and tech-enabled segments. While South-east Asia still lags behind the US, China and India on alternative fund investments into new economy sectors, the share of the technology sector in PE/VC investments has been increasing. It rose from 8 per cent in 2013 to 52 per cent in 2019 in Singapore, and from 3 per cent in 2015 to 51 per cent in 2019 in Indonesia.

Some of the key trends we have seen in the regional transaction landscape include:

  • Region's ability to attract more alternative investments has increased substantially.
  • Several new funds have successfully raised capital with a dedicated South-east Asia investment focus.
  • There have been initiatives by governments in the region to facilitate technology adoption and digitisation.

Unclear differentiators

  • There are significant overlaps between PE and VC investments, as well as between M&A and PE/VC investments.
  • Several corporates are setting up corporate venture capital funds, or are directly taking VC-type minority stakes in early stage or growth companies, while PE investors are doing buy-out control transactions.
  • PE investors are diversifying into investments in unicorns (private companies with a valuation of over US$1 billion) and growth-oriented, pre-profit companies.

IPOs and exits

  • As we see more unicorns emerge in Asia, Asian stock exchanges have been making investor-friendly reforms to attract new economy listings.
  • Public investors in Asian stock markets place more weight on profitability than growth. Hence, tech companies look to private investors and global stock exchanges.
  • Market volatility and competition in Asia have slowed listings. We are seeing longer holding periods or funds preferring exits through trade and secondary sales.

Valuation impact

  • Uncertainties in market valuations due to volatility and inherent nature of risks in early stage businesses.
  • Markdowns, down-rounds, startup failures, post-listing value erosion and other learnings from some of the global unicorns and investors could lead to market corrections in South-east Asia.

Looking ahead

In terms of the way forward for the transaction scene in the region, political and regulatory changes - including trade wars, political uncertainties etc - could have a negative impact.

However, there are several positive aspects, such as increased technology adoption, availability of capital and resources, increase in population, economic growth, etc that continue to provide a boost to transactions.

In addition, South-east Asia is expected to enter a Golden Age of rising affluence with a significant focus on Internet and tech sectors - especially considering the region's strong demographics along with growing income, rapid urbanisation, an increase in the population size of young adults and the region's ability to better weather global crises and volatility.

In summary, we continue to expect robust activity, which may come with significant disruptions and more changes to the landscape, over the next decade.

It is therefore critical to continue to focus on a business-friendly regulatory regime, with a significant emphasis on corporate governance.

  • The writer is managing director of Duff & Phelps