Tech and real estate rev up Singapore M&A scene

Deals by homegrown firms hit a four-year high at $46.19b in the first half of 2018.

Singapore's M&A scene remained abuzz with activity as a steady number of deals from the tech and real estate sector bucked the increasingly dismal market environment. In fact, M&A activities by Singapore firms hit a historic four-year high as it climbed 19.1% to $46.19b (US$33.8b) in the first half of 2018, data from Thomson Reuters show. 

State entities GIC and Temasek led Singapore’s outbound M&A activities, Clifford Chance partner Satbir Walia told Singapore Business Review. Notable deals include GIC and Temasek jointly backing Ant Financial as they acquired an undisclosed stake for its subsidiary in a funding round that hit about $19.14b (US$14b). Temasek also subscribed for an approximately 3.6% interest in Bayer AG for about $5.06b.

“Singapore continues to be the hub for investments into South East Asia,” Walia said, adding that Q2 witnessed a greater number of deals compared to Q1 and Q3.

Private firms also made their presence known with Grab buying 27.5% stake in its competitor, Uber, emerging as the talk of town, and even drawing a penalty from Singapore’s competition watchdog months later.

Grab has also raised more than US$2b from the likes of Toyota, OppernheimerFunds, Microsoft, and Ping An, noted Walia, in addition to forging a collaboration with various global and regional players across different sectors to helped achieve its superapp ambitions. 

On the property market, CapitaLand’s US buying spree worth $1.14b (US$835m) was amongst the biggest deals, Walia observed. The transaction earmarked the firm’s foray into the multifamily asset class in the US which is seeing a growing demand for long term rental housing.

Also read: CapitaLand buys 16 US properties for $1.14b

Meanwhile, also worth noting in the M&A scene is Golden Spring Group selling 75% of its stake in one of Asia’s major pure-play animal feed manufacturer, Gold Coin, to Pilmico International which is a subsidiary of Philippine conglomerate Aboitiz group for $683.83m (US$550m).

For Matthew Gorman, partner, at Reed Smith LLP, the steady surge in M&A activities come as no surprise given the inherently limited domestic market in Singapore. 

"The rationale could be that firms in Singapore are aiming to widen their company profile to a global scale – Singapore remains a relatively small market in global terms,” he explained. “Furthermore, the Singaporean government has previously encouraged companies to expand their network abroad to further enhance the country’s profile and status as a hub for international business.”

The year also witnessed a lot of consolidation plays, observed UOB group investment banking head of mergers and acquisitions Tan Chee Yang. Such transactions include the privatisation of Wheelock Properties as well as the pre-conditional general offer by Keppel and Singapore Press Holdings (SPH) for M1.

Also read: Keppel-SPH buyout offer extends lifeline to embattled M1

“There were controlling shareholders who were keen to increase their shareholdings in subsidiaries and associated companies to have greater management control and flexibility to drive the firm’s business plans,” he explained. “There were also acquirers keen to buy over firms in the same business to consolidate their presence in the sector further.”

Despite the colourful year for M&A activities by Singapore firms, Walia notes that multiple headwinds have challenged firms as competition watchdogs intensify oversight in transactions such as the Grab-Uber merger. “This increased scrutiny may have an impact on M&A activity,” she cautioned. 

"Although currency devaluation can make assets more attractive, it can also create uncertainty for investors," Walia explained. "Higher US dollar, rising US Federal interest rate and rising oil prices, may put further pressure on the currencies of some of the countries neighbouring Singapore."