-- ILLUSTRATION: ISTOCKPHOTO

Bigger companies looking for a silver lining to the dark economic clouds are seizing the chance to swallow up smaller companies now on offer at bargain prices.

These smaller firms are often glad to get a vital financial lifeline, given low trading volumes, plunging valuations and the increasing difficulty in obtaining bank financing.

And market experts say this trend is likely to gather momentum as regional bourses endure what looks to be an even more turbulent ride in the coming months.

'The worst times are the best times to do such deals,' said OCBC Investment Research head Carmen Lee.

'There's value in these companies, but it's largely undiscovered.'

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She added: 'For the company, it's also a double whammy of recent valuations going down and little interest in the stock, so you might as well take it private.'

Indeed, privatisation deals, where an offeror aims to buy up shares in a listed company, then delist it from the stock exchange, are the flavour of the moment.

Information technology firm Datacraft is set to be bought by its majority shareholder and taken private.

Another privatisation plan involves Japan's Toppan Printing. Last month, it offered $208 million for local listed printing firm SNP Corp - which represented an 11 per cent premium over its then- closing price of $1.58.

In a third such deal, United States-based China Holdings is aiming to delist Bright World Precision Machinery from the mainboard if it gets enough acceptances.

The likely targets in such deals are small or medium- sized firms, said Mr Kevin Scully, managing director of boutique finance house NRA Capital.

He added: 'In a declining market and difficult times, it's quite natural for the big to swallow the small.

'And since the market doesn't recognise your value, you might as well take it private, especially if your stock is currently trading at a low price-earnings ratio.'

Aside from these offers where a company aims to take its target private, acquisitions and takeovers are also gaining pace.

Last week, China Stationery said it planned to inject two companies into Singapore-listed Thai Village in a reverse takeover deal worth $296.4 million.

Mr Scully said such activity might lead to sector consolidation and a strengthening of the bigger industry players.

He foresees these deals gathering momentum in the electronics sector, in which there are many small players within the same space, and where there is a likelihood of 'succession issues' as the major shareholder is quite old.

Then there are the liquidity issue and credit crunch.

Mr Scully said: 'A lot of banks are withholding financing...thus these companies have less recourse in terms of alternative funding. M&As are a natural area they have to look into.'

alfoo@sph.com.sg