In Focus
MARKETS & INVESTING | Staff Reporter, Singapore

9 in 10 planned M&A deals failed in the past year

Nearly 3 in 5 bosses blamed competition and disagreement over the valuation price.

About 87% of Singapore companies shared that they failed to complete or cancelled a planned acquisition in the past 12 months, EY said. This level of failure is slightly higher than the rate in Southeast Asia at 83%.

According to the EY Global Capital Confidence Barometer, bosses cited competition from other buyers and disagreement over valuation (62%), antitrust views (23%), and intervention by activist investors (12%). Moreover, M&A appetite in Singapore and Southeast Asia have dipped amidst emerging challenges and potential headwinds in the regulatory and geopolitical fronts.

About 40% of bosses said that they plan to pursue deals in the next 12 months, which is lower than 52% six months ago. However, 83% still think the market is improving, more than double from the 40% who shared such sentiments six months ago. All Singapore executives (100%) also expect corporate earnings globally to either improve or remain stable.

Also read: Singapore M&A activity hit 4-year high at US$33.8b

As Singapore companies seek to continue to be competitive in the future, 83% see portfolio transformation as a top priority in their boardroom thinking.

Vikram Chakravarty, EY Asean managing partner, transaction advisory services at Ernst & Young Solutions LLP, commented, “We are seeing Singapore companies restructuring themselves currently, hence some portfolio shifts can be expected before a spate of larger and more targeted M&As take place. As well, while interest in conducting M&A in the region is very high, internal and external pressures are impacting the ability to complete deals.”

Cloud computing and big data (34%) and distributed ledger technology such as blockchain (33%) feature prominently on the board agenda of the Singapore corporates, which look to improve overall decision-making and boost company performance through these technologies.

Interestingly, artificial intelligence (AI) and robotic process automation (RPA) is not among the technologies that feature prominently in the boardroom agenda, as in the case of Southeast Asia corporates (21%). As more companies adopt new technologies, 63% said that they are struggling to hire people with the right skillset.

Meanwhile, Singapore executives see government spending as a critical driver of their growth plans as 97% expect government investment in infrastructure to increase over the next 12 months. This is much higher than expectations from respondents in the US (59%) and across Europe, Middle East and Africa (69%), as well as Southeast Asia (90%).

Andre Toh, EY Asean valuation & business modelling leader and partner, Ernst & Young Solutions LLP, said, “With initiatives like China’s One Belt One Road, Singapore’s focus on smart nation and digital economy, and significant infrastructure budgets in other countries, we are seeing notable deal activity in sectors such as technology, utilities, automotive and transportation driven by this investment and expect this trend to continue.”

The study also found that the top investment destinations amongst Singapore respondents are Singapore, Malaysia, China, Japan, and Australia. Singapore also features strongly as among the top five investment destinations in Southeast Asia, alongside Malaysia, Indonesia, Thailand and Vietnam.

Also read: Chart of the Day: M&A targeting Singapore companies plunged to 5-year low at US$4.3b

Purandar Rao, Singapore head of transactions, Ernst & Young Solutions LLP, added, “We are seeing more companies setting up their regional headquarters in Singapore, which is a business hub for many industries. The connectivity, infrastructure, political stability, pro-business government and availability of top talent in Singapore are some of the key elements that help the country to maintain its edge as an investment destination for companies.”

The top sectors in Singapore looking to make acquisitions are real estate, hospitality and construction; financial services; automotive and transportation; consumer products and retail; and telecommunications.

Across Southeast Asia, those that intend to make acquisitions over the next 12 months are from power and utilities; oil and gas; industrials; automotive and transportation; technology; and life sciences sectors.

The study is a biannual survey of 2,500 executives across 43 countries, including 30 from Singapore and 180 from Southeast Asia (Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam). 

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