Singapore deals up by 34% in 2016

Opportune time for local firms to invest overseas: Ernst & Young

The value of Singapore investment deals struck last year - including both those made here and overseas - has shot up.

It hit US$90 billion (S$126.6 billion) last year, against US$67 billion in 2015 - an increase of 34 per cent - thanks in part to multi-billion buyouts, some by sovereign wealth funds, EY's transaction advisory services has said.

This includes deals by Singapore firms overseas and foreign investments that came into Singapore. For instance, Temasek Holdings, DBS Group Holdings and other investors bought a 16.9 per cent stake in Postal Savings Bank of China, valued at US$7 billion, last year.

Outbound investment by Singapore firms into Asia, Europe and the United States continued to be strong, driven by attractive valuations and capital availability. It contributed to 63 per cent of total deal value last year, compared with 66 per cent the year before, said Ernst & Young Solutions' transaction advisory services director Ashutosh Deshmukh yesterday.

Inbound deal flow from foreign investments contributed about 20 per cent last year, compared with 19 per cent the previous year, according to EY's December survey of over 30 local consumer, pharmaceutical and industrial goods companies.

Mr Vikram Chakravarty, EY's Asean transaction advisory services leader, told a briefing: "For the past five years, there has been consistent flow of outbound deals from conglomerates and funds buying in Europe, US and Asean.

"That's driven by a desire to grow outside of Singapore. Valuations are quite attractive and balance sheets are strong.

"Around the middle of last year, following the Brexit vote, we had a slew of clients that started reviewing their acquisitions in Britain. It resulted in a bunch of questions over whether we should go through Europe and the United Kingdom."

He said the same conversations are playing out after the US presidential election. "Companies are going to look at their investment profile in the US and see what it means. US firms looking to invest in Asia are asking how much they can invest here, although we've been seeing that in the past few years. US companies are already putting money back into the US, even before the Trump effect... So if US firms are shying away, and Chinese firms are wrestling with capital controls, Singapore firms can make the play for it now. They are ideally placed to make a massive investment and become global champions."

Mr Karambir Anand, a partner with EY's transaction advisory services, said it is an opportune time for Singapore firms to make more deals, as China's efforts to prevent capital from leaving the country are eroding the confidence of domestic and foreign investors. Deal-makers say many Chinese firms are unable to close deals because they cannot secure official permission to transfer yuan into foreign exchange.

Mr Karambir noted: "This is an interesting time for Singapore firms to consolidate within, and then go out. How do you balance getting Singapore firms under one umbrella and buying assets at reasonable valuations that, for once, Chinese firms aren't bidding up?"

The survey also found that Asia remains the primary region Singapore firms would invest in, followed by Europe and the US. At least a third are eyeing acquisitions in the next six months, with the deals expected to be between US$100 million and US$500 million.

A version of this article appeared in the print edition of The Straits Times on February 28, 2017, with the headline 'Singapore deals up by 34% in 2016'. Print Edition | Subscribe