$1b state fund may spur outbound M&A deals

Fast-growing tech startups and property companies could benefit from the plan.

Singapore may see more cross-border mergers and acquisitions (M&A) after the government pledged $1b in capital for high-growth local companies.

“The fund will allow growth-stage companies to acquire regional and  international companies as a pathway for expansion,” Anil Rai, a partner at YCP, told Singapore Business Review.

He expects more local companies to “acquire competitors, integrate supply chains, and expand into  new markets.”

In 2024, the value of deals where Singapore companies bought out a foreign entity declined 41% to US$14.7b from a year earlier, the lowest in nine years, according to Intuit Management Consultancy.

Companies seeking to tap the fund for M&A should show a clear roadmap for sourcing potential targets and integrating acquisitions, Rai said in an emailed reply to questions. It should include “strategic, operational, and financial aspects of the transactions.”

The government has yet to announce the eligibility criteria for the fund, but Rai expects companies with strong execution capabilities to have a bigger chance of securing financing.

He urged the government and fund administrator to back strategic M&A deals that deliver long-term value and support scaling across the value chain. 

“Companies that proactively structure their M&A strategies  and engage with advisers early will be best positioned to benefit from this initiative,” he added.

Rai said sectors with longer development cycles, such as biopharma and tech-driven manufacturers advancing toward Industry 4.0, stand to benefit from the initiative given their need for sustained capital investment before realising returns.

The fund could transform fast-growing tech startups, fintechs, and deep-tech firms, said Aidan Khoo, director for management consulting at Forvis Mazars in Singapore.

“Private credit offers an alternative to equity funding while preserving ownership,” he told Singapore Business Review. “These businesses often face high capital needs but may be reluctant to dilute control through equity, making private credit an attractive option to fund expansion and innovation.”

Mid-sized companies in healthcare, advanced manufacturing, and green energy could also benefit given their high research and development and sustainability costs, Khoo said. 

Asset-heavy sectors like real estate and infrastructure might also find the private credit fund a more flexible alternative to bank loans, he added.

Companies seeking private credit from the initiative must be financially stable and have a scalable growth roadmap and strong governance frameworks that ensure transparency, Khoo said.

“A well-defined, scalable growth plan supported by data and realistic projections can help demonstrate future potential,” he said.

“Lenders are more likely to commit capital when they see a clear path to value creation and business expansion.”

The government, for its part, should manage the fund carefully and deploy it with the support of  accredited advisers to keep nonperforming loans to a minimum, Rai said.

“Every program begins with noble and ambitious objectives, but to prevent them from going off course, the appointed private credit manager must carefully assess which companies are investible and which are not,” he added.