M&A mania to sweep Singapore firms in 2016: report

Property, healthcare, O&M will see the most restructuring.

Privatisation, takeovers, and corporate restructuring will likely be seen left and right in the coming year, particularly in the property, healthcare, and offshore & marine sectors, according to a report by Maybank Kim Eng.

The report also noted that one reason M&As will accelerate is that the oilfield service industry needs to consolidate to cut costs for survival and long-term profitability. Many small players are currently over-leveraged due to debt-funded expansion, and may face bankruptcy if the downturn persists.

A second reason for the rapid uptick in M&As is that many corporates are on the prowl for growth in emerging Asia as developed markets slow. While there may be no big M&A deals for Singapore banks in 2016, there will still be the occasional acquisition of smaller Asian assets from European banks. Combining the interest in expanding footprints in Indonesia with the likelihood of a loosened regulatory environment, Singapore banks will probably become active in Indonesia.

Also, companies are seeking ways to boost weak profits, unlock value, or streamline operations through divestments. More assets or company units could be up for sale. REITs in particular will likely be ripe for the picking.

Lastly, a depressed equity market has devalued companies so much that some are now primed for takeover or privatisation. Property stocks are trading at 20 to 40% to their RNAV, as they brace for further price falls. Furthermore, developers may seek ways to drum up shareholder returns by disposing assets.