Outlook for deals and financing in Singapore and S-E Asia still cautiously optimistic

SINGAPORE - The appetite for dealmaking and fund raising in Singapore and the larger South-east Asian region may improve later this year to next year as companies review their portfolios and pursue acquisitions to plug strategic gaps, bankers and financial advisers said. 

PwC, one of the big four consultancy firms, said in its mid-year review that merger and acquisition (M&A) activity ahead might not all be eye-catching mega deals, given recession fears and rising interest rates, but smaller deals that could also drive transformation and growth.

“While cash-rich corporates remain well-positioned to make larger moves, we see mid-market transactions dominating the market in coming months,” it said. “Deal flow could open up in the second half of the year.”

Morgan Stanley said the healthcare, technology and energy sectors will lead activities, adding that the record amount of uninvested capital in private equity funds could help drive more M&As later this year despite choppy debt-financing markets. 

Mr Martin Siah, Singapore country president for Bank of America, told The Straits Times that the bank’s outlook for the second half of 2023 remains cautious, even as pockets of opportunities are seen. The investment-grade debt capital markets are likely to remain active, he added. 

He said: “Given the long-dated nature of our business and our advisory relationship with clients, we are laying the groundwork with many of our clients on potential capital markets and M&A opportunities. As and when the markets head into calmer waters, we can then start executing transactions, say, by early 2024.”

The banker added: “Continued market uncertainties or lack of direction could result in sluggish decision-making, leading to lower transaction volumes.”

M&As and capital market activities should ramp up as macro clouds begin to lift, and companies have greater clarity on central bank actions and the global economy, he said. In the second half of 2023, strong activity will be seen in sectors that have been more defensive. 

“Healthcare and infrastructure are standouts, and we are running several processes and are involved in transactions to be announced in due course,” said Mr Siah.

Market consolidation will be a “centrepiece” of the strategic dialogue, given the challenging financing markets, particularly in technology and early-stage companies. 

Bank of America Securities topped the investment banking fees generated in the first half of 2023 in Singapore and South-east Asia. It captured a bigger market share of 9.2 per cent in Singapore, and nearly 7 per cent in South-east Asia.

The latest performance was a result of multiple years of collaboration with clients, leading to successful execution of transactions in a challenging market environment, he said.

Within the capital markets, major transactions the bank was involved in included Sats’ $800 million rights issue; DBS Bank’s $1.2 billion bond, which is the largest debt capital in Singapore so far in 2023, as well as the US$620 million (S$834 million) initial public offer of Merdeka Battery Materials in Indonesia.

Bank of America had advised most of the sovereign bond issuances for the governments of the Philippines and Indonesia as well as the US$1.5 billion bond for Malaysia’s sovereign wealth fund Khazanah, and the US$500 million bond for ST Engineering.

In the M&A segment, the bank was the exclusive financial adviser for SingPost’s strategic review. Its role was to enhance shareholder returns and ensure SingPost is appropriately valued in the Singapore market.

It was the exclusive financial adviser to Shell in the latter’s sale of a 35 per cent stake in Abadi LNG to Indonesia’s Pertamina and Malaysia’s Petronas for US$650 million.

The bank was also the adviser to Sats regarding its purchase of Worldwide Flight Services, as well as to sovereign wealth fund GIC in its transactions involving Store Capital Reit and Indus Realty Trust.