M&A transactions to dip next year

PETALING JAYA: Malaysia is expected to see a dip in merger and acquisition (M&A) transactions next year, with 292 deals amounting to US$12.2 billion (RM50.9 billion) compared with the 311 deals amounting to US$13.2 billion transacted this year.

According to the fourth edition of the Global Transactions Forecast, issued by Wong & Partners, the Malaysian member firm of Baker McKenzie, the number of deals concluded in 2018 underlines a robust market moving into 2019 and beyond.

The report quoted Oxford Economics as saying that M&A in Malaysia accelerated sharply in 2018, with two megadeals in excess of US$1.5 billion and a further nine significant deals of between US$200 million and US$600 million.

The solid growth of gross domestic product (GDP) at around 4-4.5%, modest increases in interest rates, and a range of policy measures that promote deal-making, such as the recent cuts to small and medium enterprise corporation tax and the Industry 4.0 framework was seen as positive deal drivers for M&A activities.

The report noted that after a year of political sea-change, Malaysia’s deal climate will see some positive spillover effect from 2018 to 2019, buoyed by the robust markets, solid GDP growth, and a range of policy measures that promote deal-making.

“These numbers reflect the cautiously optimistic attitude of the market based on the new coalition government’s policy of balancing the need to firmly address the country’s fiscal deficit while ensuring market friendly initiatives that support growth,” said Munir Abdul Aziz, a partner from the Corporate, Commercial and Securities practice of Wong & Partners.

“We expect activity in 2019 to take the form of divestments of certain strategic assets by the sovereign wealth fund, continued private equity investments and exits including those driven by foreign private equity sponsors, take private transactions that exploit attractive pricing in the aftermath of the emerging market turmoil in equity markets in late 2018 and the subdued ringgit and likely upside from realignment in the Asian supply chain arising from trade tensions between the US and China,” he added.

Munir noted that there could be greater deal-making activity driven by the new government’s intent to create a more competitive market environment for hitherto sheltered industry sectors like energy, media and telecoms. A certain degree of re-organisation of large conglomerates including potential spin-offs or demergers are also expected.

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