Singapore M&A appetite remains steady at 40% amidst rising competition

4 in 5 corporate executives are looking to local, US, UK and Australia markets for M&A deals.

The appetite for mergers and acquisitions (M&A) in Singapore remains resilient with 40% of corporate executives planning to acquire investments amidst rising competition for assets and geopolitical disruption, according to the Southeast Asia (SEA) edition of the 19th Ernst & Young (EY) Global Capital Confidence Barometer (CCB) report.

Whilst the figure is lower than the SEA average of 46%, the appetite for Singapore-based corporate executives remained unchanged from six months ago. Fuelling this resilient appetite for M&A was attributed to increasing competition for assets according to 83% corporate executives in Singapore.

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However, the report found that respondents from Singapore were split on where they see this competition coming from, with 38% seeing competition from private equity (PE) and 31% citing corporate investment funds as the reason. 

According to the report, SEA firms will continue to tap regional opportunities as the top five investment destinations amongst SEA executives were found to be Singapore, Vietnam, Malaysia, US and China.

That being said, more than half or 57% of SEA executives surveyed said cross-border deals are still a main priority which contrasts sharply with the average 28% of global executives looking beyond their own borders for M&A.

For Singapore corporates, 83% of those that are planning M&A cited cross-border as a priority, with local, US, UK, Malaysia and Australia as the top investment destinations. Acquiring talent and gaining access to local markets were found to be the key drivers for cross-border deals amongst SEA and Singapore executives.

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“Cross-border expansion is a natural evolution for growing businesses. This has been seen in China, Japan and many of the mature Southeast Asian companies,” EY ASEAN transaction advisory services leader Vikram Chakravarty said in a statement. “However, cross-border deals can be complex in nature and managing integration may be challenging. Companies need to consider a deliberate approach to capture synergy as they pursue the deals.”

Meanwhile, EY noted that the complex environment is prompting SEA executives to review their portfolios more frequently, with 90% of Singapore executives reviewing their portfolio at least every six months versus 82% regionally and 66% globally. As a result of portfolio reviews, 80% of corporate executives in Singapore identified assets to divest due to underperformance or risk of disruption which could see more assets coming to market in the medium term.

Less than half or 44% of Singapore corporate executives saw geopolitical and regulatory changes as the biggest potential risk to dealmaking, whilst 27% also cited them as risks to core business growth. Nevertheless, 87% of SEA and Singapore respondents expect the global M&A market to improve in the next 12 months, with 83% expecting their respective local markets to do the same.

“Opportunities are abundant, but the challenges and risks are very real. Hence, it is critical that firms think through their strategy as they consider deals, and do deep evaluations on the target before taking the leap,” Chakravarty concluded.

The biannual report surveyed 2,600 executives across 45 countries of which 192 are from Indonesia, Malaysia, Singapore, Philippines, Thailand and Vietnam.