No mega-deals as Singapore M&A market slumps

Deal value fell 7% year on year, whilst volume dropped 27%.

Deal activity in Singapore dipped in the first five months as companies prioritised mid-sized strategic transactions worth $1.27b-$6.35b (US$1b-US$5b) amidst volatile global financial markets.

The value of mergers and acquisitions (M&A) fell 7% year on year to $34.8b (US$27.35b), whilst the volume dropped 27% to 482 deals, according to the London Stock Exchange Group (LSEG).

“Several headline transactions reflect strategic divestments and portfolio realignments involving Singaporean firms,” Elaine Tan, deal intelligence senior manager at the LSEG, told Singapore Business Review.

The volume of mid-sized deals rose 40% year on year to seven, while their value increased 14.8% to $14.8b (US$11.65b). The largest among them was Baidu, Inc.’s $2.67b (US$2.1b) acquisition of the livestreaming business of Singapore’s JOYY, Inc.

On the other hand, deals below $1.27b declined 27%, whilst there was no mega-deal higher than $6.35b.

“Smaller transactions might be facing more hurdles or being put on hold altogether,” said Craig Loveless, a partner at global law firm Norton Rose Fulbright. The trend was evident across the wider M&A market, he pointed out.

One notable deal below $1.27b came from the industrial sector: Hanwha AeroSpace Co. Ltd.’s $1.14b (US$894.4m) acquisition of a stake in Hanwha Ocean Co. Ltd. from Hanwha Energy Corp. Singapore Pte. Ltd.

Tan said industrial companies led Singapore’s M&A market by deal value, accounting for 17% of total activity at $6b (US$4.72b), up 15% from a year earlier. Adani Ports & Special Economic Zone Ltd.’s $2.63b (US$2.07b) acquisition of Abbot Point Port Holdings Pte. Ltd. was the biggest deal in the sector as of 17 June.

Real estate ranked second in deal value with a 15% market share, reaching $5.08b (US$4b), up 41% from a year ago. Tan attributed the increase to large transactions such as Frasers Asset Management Ltd.’s $1.63b (US$1.28b) sale of Frasers Hospitality Trust.

Volume-wise, high-tech companies led with 106 transactions. The sector’s deal value also jumped 61% year on year to $4.84b (US$3.81b), or 14% of total M&A activity.

There has been “heightened demand” for artificial intelligence (AI)-driven platforms and digital infrastructure assets in Singapore, Tan said in an emailed reply to questions, citing Diginex Ltd.’s $2.54b (US$2b) pending acquisition of Singapore-based Resulticks Global Co. Pte. Ltd.

“One of the ways in which businesses are augmenting their AI capabilities is through acquisitions of companies which are in a similar space,” Neha Singh, chairperson and managing director at Tracxn Technologies Ltd., told Singapore Business Review via Zoom.

Highlighting the trend, Singh cited Swiss company SonarSource SA’s February purchase of AutoCodeRover, which was founded by National University of Singapore researchers, and GlobalData Plc’s March acquisition of Singapore-based Ai Palette.

Demand for data centres, cloud service providers, and telecommunication infrastructure platforms is driving growth in the digital infrastructure sector, said Stephen Bates, a partner and head of deal advisory at KPMG in Singapore.

“Global and regional private equity and infrastructure funds have been particularly active, pursuing platform acquisitions for scalable market entry and carve-outs to unlock value from noncore assets,” he told Singapore Business Review.

“These strategies are supporting their build-out of regional infrastructure portfolios with operational synergies and long-term growth potential,” he said in an emailed reply to questions.

Bates said more private equity firms and corporations have diversified into high-quality assets with stable cash flows, particularly in the digital infrastructure and healthcare sectors.

“There’s a clear pivot in deal makers’ strategies toward high value investments,” he said. “Investors are pausing on broader deal activity amid rising geopolitical uncertainty and concerns surrounding trade protectionism.”

“Instead, they are concentrating capital on fewer, high-quality opportunities,” he added.

Acquirers are now placing more weight on the financial sustainability of targets, Singh said. “Some companies now require targets to have a clear path to profitability.”

With investors focusing on long-term value amidst growing macroeconomic complexity, deal structures have increasingly been incorporating flexibility and shared risk, Bates said.

He cited the broader use of “deferred consideration and earn-out mechanisms," where part of the purchase price is paid later based on the target’s future performance.

“This alignment of incentives is proving valuable in recent M&A processes, where headline valuations may be difficult to justify upfront but can be supported through performance-based outcomes,” he added.

More private equity firms have been active in Singapore and across Southeast Asia, Bates said.

“There remains a significant amount of dry powder that private equity funds need to deploy,” he said. “We expect private equity M&A activity to continue to pick up across the remainder of the year and beyond, particularly in sectors offering resilient cash flows and scalable growth.”

He also cited a growing interest in Singapore from global and regional institutional funds and companies pursuing growth through platform investments and bolt-on acquisitions.

Loveless said Singapore is seeing strong interest from Japanese and US investors. “We also see growing interest from Chinese investors into Southeast Asia,” he told Singapore Business Review in an email.

Bates said Singapore-based investors are driving horizontal and vertical consolidation across local and regional markets, especially in financial services, digital infrastructure, and healthcare.

“There has been considerable consolidation of clinics and medical service specialists by both corporate and private equity buyers in the domestic market, reflecting the growing demand for healthcare services and the strategic importance of this sector,” he added.