Fewer mergers and acquisition deals in Singapore as Covid-19 disrupts investment activity

Outbound deals - Singapore companies buying equity stakes offshore - formed the bulk of the M&A transactions. ST PHOTO: ALPHONSUS CHERN

SINGAPORE - Singapore saw fewer mergers and acquisitions (M&As) and other deals amid the coronavirus-induced recession this year, said a report on Tuesday (Dec 22).

A total of 640 transactions worth US$65.3 billion (S$87 billion) - including M&As, initial public offerings (IPOs), and private equity and venture capital deals - were recorded from December 2019 to November 2020, according to the latest Duff & Phelps Transaction Trail Report.

That compares to 809 transactions worth US$81.2 billion in the earlier 12-month period.

The report also covered deals in Malaysia and Indonesia for the same period.

Malaysia recorded a total of 295 transactions worth US$5.9 billion, while Indonesia saw 184 transactions amounting to US$13.5 billion.

M&As in Indonesia defied the declining regional trend, registering US$9.7 billion in value, up 35 per cent from US$7.2 billion in 2019. The drag witnessed in deal activity, however, pulled down the transaction volume to 62 deals in 2020 from 94 in 2019.

Ms Srividya Gopal, managing director of Duff & Phelps in Singapore, said businesses across the world have faced serious challenges this year arising from the pandemic, lockdowns and travel restrictions that resulted in valuation uncertainty, transactions being cancelled or renegotiated, impairment losses and bankruptcies.

"The robust level of deal activity in the region in 2020, despite these challenges, is a testament to the criticality of transactions and investments for the strategic growth and sustenance of businesses here," she said.

The Duff & Phelps report showed that a total of 482 M&A deals were struck in Singapore, valued at US$59.2 billion, compared with US$72.4 billion a year earlier.

Outbound deals - Singapore companies buying equity stakes offshore - formed the bulk of the M&A transactions, amounting to US$40 billion or 67 per cent of the total deal value, followed by domestic deals, which amounted to US$12.9 billion, the report said.

During the same period, Singapore witnessed 149 private equity and venture capital investments, worth a total of US$5.2 billion.

Capital raised from IPO listings in Singapore was noticeably lower this year.

A total of US$944 million in IPO capital was raised for 2020, significantly below 2019's US$2.3 billion.

Real estate was the top sector this year, contributing to about 38 per cent of M&A value, driven by consolidation in the sector, as well as overseas acquisitions by Singapore investors.

The energy sector took the second spot at 19 per cent, followed by banking, financial services and insurance, or BFSI, in third place.

Ms Gopal said that while she expects the impact of the pandemic to last for several more months, businesses have adapted to the new normal of doing transactions.

"With this view and considering the political changes in the United States, a possible improvement in the US-China relationship, more political stability, continued increase in technology adoption and increased availability of capital resources to the region, we can expect to see strong transaction activity in the future," she added.

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