In 2016, dealmakers were presented with a range of challenges including low commodity prices, volatile capital markets in some parts of Asia, a new US administration, and the unexpected, by some, the shock of Brexit. The market finished off 2016 with resilience despite the challenges, 2017 might not seem like the year many were expecting but as we move towards the end of the year, it looks like the M&A markets still managed to hold up well.
In 2Q2017, dealmakers were having mixed sentiments with a slide in the number of deals announced but a rise in the overall value of deal-making activities. According to a research from FactSet, the first half of 2017 saw a 2% increase in the number of global M&A deals announced over that of 1H2016, aggregating at US$ 1.6 trillion. On the other hand, the total number of deals announced in 1Q2017 fell by 17.9% as compared to 1Q2016, while the overall deal value was up by 8.9% to a total of US$ 678.5 billion which
translated into an average deal value of approximately US$403.4 million.
The Asian M&A market increased slightly in 3Q2017, with an increase of 44 announcements to 2,384 in 3Q2017 as compared to 2,340 in 2Q2017. In addition, M&A spending significantly increased from $ 168.5 billion in 1Q2017 to $203.4 billion in 2Q2017, representing the second largest quarterly total of the last five quarters. However, it has dropped 1.7% to $194.9 billion in 3Q2017, according to a FactSet report.
We are seeing increasing cross-border deal making, particularly between Asia and the North America, as well as a continuing flow of outbound acquisitions from China into Europe and Asia. China’s outbound activity in 1Q2017 posted US$ 15.8 billion from 181 deals, while Australia’s outbound activity stood at US$ 2.3 billion from 64 deals. These numbers, although significant, are comparatively lower in relation to the same period in 2016. China’s inbound M&A activities continue its upward trajectory, with a 29% rise in volume to 62 deals and a 69% rise in value to US$13.2 billion from 1Q2017.
Heading into the last quarter of 2017 with macroeconomic uncertainty, there is still an uptick in inbound M&A activities where the continued desire of many companies pursue acquisitions to supplement organic growth. Despite the fluctuations in M&A within the various regions in Asia Pacific, the investment mix has moved beyond the traditional primary industries into technology, industrial, chemical and consumer sectors. According to a report by FactSet, deal value in the technology sector more than doubled from US$ 12.7 billion to US$ 30.3 billion, topping the chart in the first half of 2017, followed by commercial services and the manufacturing industry. The industrial, consumer, service and technology sectors will very likely be the focus for most Asia Pacific investors, driven by the transformation to a consumer-driven and service-oriented economy. The technology sector will continue to attract investments, especially in the artificial intelligence, e-commerce and fintech industries.
According to data from Thomson Reuters, the value of announced mergers in 2Q2017 involving Singapore companies reached US$ 11.8 billion, a 10.4% increase from 1Q2017 despite a 16.3% drop in the number of announced deals. Three huge deals worth US$ 2 billion would push M&A activities in Singapore higher by the end of 2017, according to the Global Transactions Forecast issued by Baker McKenzie. M&A transaction for 2017 is expected to reach US$ 23.1 billion, up 26% from 2016’s US$ 18.3 billion. We saw the real estate (68.3%) and healthcare (11%) sector taking up the majority of Singapore’s domestic M&A activity.
The real estate industry in the most targeted sector in Singapore thus far, and driven by this year’s biggest Singaporean M&A deal – Mapletree Investments’ acquisition of the student housing portfolio of US-based Kayne Anderson Capital Advisors, owned by Virtus Investment Partners Inc, for an estimated US$ 1.6 billion. With increasing number of companies operating globally, a strong presence and a secure foothold in the global trade will become increasingly important and indispensable.
Analysts are in agreement that the next twelve months will be robust and promising as deal values and volumes are on the upside. These trends, together with private equity firms shifting into more active portfolio replenishment mode, may well impact anticipated growth in M&A transactions.
Our M&A advisory team can manage and facilitate your merger and acquisition process in full length from target identification, strategy development, conduct of due diligence, execution and closing of the acquisition deal. Specifically, we can assist in sourcing for potential target, analysing potential financial impacts/benefits of the acquisition, developing acquisition proposal and negotiation strategy, negotiation of the terms of purchase and arrangement of financing if required.
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