Shocks to the system: Southeast Asian M&A deal value halves in 2022

Data InsightDealspeak 27 January

Shocks to the system: Southeast Asian M&A deal value halves in 2022

Key trends:

  • Inbound activity fell 65% to USD 26.3bn in 2022 from USD 76.2bn in 2021.
  • Outbound activity was down 35.5% to USD 52.5bn from USD 81.4bn.
  • Transportation joins top five sectors, with increased deal value of USD 8.9bn, up 2.3% from USD 8.7bn in 2021.
  • Mining, which jumped to sixth place from 14th, saw deal value rocket to USD 6.4bn, 1,509.7% up on USD 397.6m the previous year.
  • Retail sector spiralled out of top five sectors, sliding to 17th, with deal value of USD 689m, down a hefty 93.6% from USD 10.8bn in 2021.

M&A deal-making in Southeast Asia took a step back in 2022. Total deal value almost halved, plunging 48.6% to USD 86.1bn across 875 transactions, compared with a staggering USD 167.5bn from 928 deals in 2021, according to Dealogic data.

The region experienced multiple shocks over the course of year: Russia’s invasion of Ukraine, which impacted the global supply chain; the US Federal Reserve’s tightening of monetary policy, which hiked the value of the US dollar, hitting the cost of imports and those companies struggling to pay debt; and China’s economic slowdown on the back of Beijing’s strict zero-COVID-19 policy.

The slump in overall deal value was also exacerbated by the absence of the mega tech deals that lit up 2021, such as the USD 40bn Grab [NASDAQ:GRAB] tie-up with a special purpose acquisition company (SPAC), and USD 18bn GoTo [IDX:GOTO] merger, as reported by this news service.

At the same time, private-equity (PE) investors proceeded with caution throughout the year, with total deal value tumbling 81.3% to USD 10.3bn from 37 deals, compared with USD 55.1bn generated across 40 deals in 2021. Smash Capital, Insight Partners, and GIC’s acquisition of a minority stake in Singapore-based electronic payment app Coda Payments for USD 690m was the largest PE deal of the year.

Financial sponsor exits also dipped 85.7% to USD 5.8bn in 2022 from USD 40.7bn the previous year.

Bucking the trend

Despite a region-wide downward trend, the Philippines was Southeast Asia’s main outlier in 2022. It recorded a 5.7% increase in deal value to USD 8.4bn from USD 7.3bn the previous year. Myanmar also saw a 39.5% rise in total deal value to USD 885.57m from USD 635m in 2021.

Computers and electronics sealed top spot, with 228 deals worth USD 14.7bn, although the sector also saw a 77.89% decrease from USD 66.5bn in 2021. This was followed by real estate/property, which signed 45 deals worth USD 10.6bn, down 29.8% from 48 deals for USD 15.1bn. Telecommunications took third place, with 26 deals worth USD 9.5bn, retreating 52% from 24 deals for USD 19.8bn.

The uptick can be attributed to a number of telecoms tower auctions, led by Globe Telecom [PSE:GLO], which in August announced it would sell around 5,709 towers for USD 1.28bn, as this news service reported. Telecoms firms have been looking to sell their tower assets, in line with the government’s common tower policy, launched in June 2020.

Singapore remained the region’s top M&A dealmaker in 2022, inking 308 deals worth USD 34.7bn, although this was down 63.24% from USD 94.4bn across 341 deals in the prior year. The sovereign saw the biggest deal in the region, when domestic lender United Overseas Bank’s [SGX:U11] said in January that it would acquire Citigroup’s [NYSE:C] consumer business in Indonesia, Malaysia, Thailand and Vietnam. The consumer business had an aggregate net asset value of SGD 4bn (USD 3bn). This was followed by Singapore-based conglomerate Keppel Corporation’s [SGX:BN4] takeover of Keppel Offshore & Marine and Sembcorp Marine [SGX:S51] for USD 3.2bn. Singapore’s third-largest deal featured Mach Energy Hong Kong’s purchase of a 58.17% stake in Indonesian mining firm Bumi Resources [IDX:BMRS].

For Singapore and the rest of the countries in the region that saw M&A activity decline from 2021 levels, all were affected by the multiple aforementioned shocks to the system.

Anyone for TMT?

Despite fears of an impending recession in 2023, the technology, media and entertainment, and telecommunications (TMT) sector will lead the way in terms of the bulk of M&A activities to support the region’s growing digitalisation. Indonesia, which ranked second by deal value (USD 22.5bn) in 2022, will see more TMT deals, as companies hunt capex for 5G deployment, with Smartfren Telecom [IDX:FREN] likely to be among the targets.

Singapore’s Keppel Corp is expected to clock up more deals in 2023, as it continues to monetise its non-core assets and reinvest the proceeds. Sale processes that could be launched or relaunched this year include Goodpack, Beyonics Technology, and Asia Medical Enviro Services.

Other deals that could push through are the sale of Thailand-based Nitipon International Group by Navis Capital, and South and Southeast Asia healthcare platform Everlife Holdings by Everstone Capital.

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