M&A deals slow as economy takes a blow

NOL's sale of APL Logistics was one of the biggest deals this year involving Singapore target firms, said industry research firm Mergermarket. It also reported that law firm Allen & Gledhill ranked No. 1 here in terms of total deal value and volume h
NOL's sale of APL Logistics was one of the biggest deals this year involving Singapore target firms, said industry research firm Mergermarket. It also reported that law firm Allen & Gledhill ranked No. 1 here in terms of total deal value and volume handled.PHOTO: NEPTUNE ORIENT LINES

Number and value of deals in first half of year lower than during 2008 global financial crisis

Volatile stock markets and global economic instability are hitting merger and acquisition (M&A) activity here, according to industry research firm Mergermarket

The number and value of deals struck in the first half this year were lower than the same period in 2008, when the global financial crisis was raging.

The Republic snagged 48 deals worth US$9.1 billion (S$12.8 billion) in the first half of this year against 54 worth US$10.9 billion in the first six months of 2008. It was also well below the first half of last year when 65 deals worth US$13.2 billion were inked.

There were 147 deals in all last year, worth US$27.2 billion.

"M&A activity has slowed in Singapore, because stock markets have been quite volatile and the global economy has been unstable due to the slowdown in China and the Greek crisis, said Ms Riddhima Saxena, Mergermarket's Singapore bureau chief.

DEALS TAKING LONGER

M&A activity has slowed in Singapore, because stock markets have been quite volatile and the global economy has been unstable due to the slowdown in China and the Greek crisis... There are deals in the works, but they are taking longer to materialise due to mismatch in valuations.

MS RIDDHIMA SAXENA, Mergermarket's Singapore bureau chief

"There are deals in the works, but they are taking longer to materialise due to mismatch in valuations."

M&As began on an active note this year but they began to taper off towards the end of the second quarter, noted Mr Andrew Lim, co-head of corporate M&A at law firm Allen & Gledhill. He added that the uncertain global economic outlook will likely affect M&As across South-east Asia, including Singapore, for the rest of the year.

Mergermarket said Allen & Gledhill ranked No. 1 in Singapore in terms of total deal value and volume handled.

Its deals totalled US$6.28 billion for the first half of the year compared with US$15.7 billion in the same period last year.

The largest M&A transactions the firm dealt with this year included the US$37 billion acquisition of Broadcom Corp by Avago Technologies; the S$5 billion merger of Ascendas and Singbridge; the S$3.6 billion voluntary unconditional cash offer for Keppel Land; and the US$1.2 billion sale of APL Logistics by Neptune Orient Lines to Japanese freight carrier Kintetsu World Express.

Law firm WongPartnership took second place with a total deal value of US$5.3 billion for the first half, up from US$5 billion a year ago. It was also involved in the merger of Broadcom and Avago, as well as the move by JTC and Temasek to merge their units Ascendas, Singbridge Group, Jurong International and Surbana International.

Mr Ng Wai King, joint managing partner of WongPartnership, said the issue is how much longer deals are taking to get done this year compared with last year.

Global stock market volatility, distractions arising from domestic issues, regional tensions and the drop in commodity prices are among factors that "may in turn give rise to mismatch in expectations between parties when deciding on valuations", he said.

But there are still opportunities, Mr Ng noted. "The drop in oil prices has allowed some clients to consider how to restructure their business and for others to offer alternative capital to oil and gas companies seeking to diversify their funding requirements."

Despite the slower pace of activity, Singapore still ranked top in the region in terms of deal value, Ms Saxena said.

Mergermarket said the biggest deals this year involving Singapore target firms included Keppel Corp's privatisation of Keppel Land; NOL's sale of APL Logistics; and the sale by a consortium of 11 airlines of their stake in travel distributor Abacus International to American-based travel and tourism technology provider Sabre Corp.

A version of this article appeared in the print edition of The Straits Times on September 14, 2015, with the headline 'M&A deals slow as economy takes a blow'. Print Edition | Subscribe