Slew of M&A deals in Singapore in recent months

SINGAPORE — There has been a slew of mergers and acquisitions (M&A) in Singapore in recent months, with OCBC’s acquisition of Hong Kong’s Wing Hang Bank and Fraser Centrepoint’s takeover of Australia’s Australand Property Group being two of the leading deals that have helped push outbound M&A volume so far this year to S$34 billion.

According to statistics from Dealogic, Singapore’s outbound and domestic deals in 2014 are at almost S$54 billion so far, exceeding full-year volumes of recent years. Going forward, experts said the search for growth is likely to continue to drive the trend.

In addition to pursuing growth, a healthy balance sheet is another factor behind this development, according to Mr Daryl Liew, senior portfolio manager for Reyl Singapore.

“A number of companies are sitting on relatively healthy balance sheets, so they have the cash to explore and exploit these growth opportunities where they exist. The other aspect is that leverage cost is relatively low at this point in time, so that means that the hurdle rates are low,” he said.

Market watchers expect many of these conditions to persist in the near term and they believe M&As may remain the favoured growth option in Singapore, especially in certain sectors where organic growth is limited.

For example, Mr Terence Wong, head of research at DMG & Partners Securities points to property companies as a sector that is seeing privatisations or M&A activity because developers feel that such companies are trading at steep Revalued Net Asset Valuation.

“Investors have largely ignored many of these companies that have good fundamentals and are trading way below their asset value. Property developers, on the other hand, are long-term players, so they will swoop in at such rates, which is favourable for them in the mid- to long-term,” he noted.

As for financial or consumer players, they are “taking advantage of the coffers they have built up over the last decade or so”, said Mr Wong. “The domestic market is very small and it has been small for a long time. They are looking at regional players to acquire so as to diversify away from domestic presence.”

According to a report released this week by Standard & Poor’s, the recent activity is reflective of a region-wide trend, where acquisitions by major ASEAN companies are on track for a record year. Almost US$300 billion was spent on expansion and acquisitions by the region’s largest companies between 2008 and the first quarter of 2014.

CHANNEL NEWSASIA