Southeast Asian region to generate most M&A opportunities

Kuala Lumpur: The Southeast Asian region is expected to generate the most mergers and acquisitions (M&A) growth for the next three years, according to a survey conducted by Ernst & Young (EY).

EY global strategy leader and EY Asean strategy and transactions leader Vikram Chakravarty said other geographic regions that are expected to generate growth opportunities were India, Japan and Oceania.

“Driving this acquisition appetite are concerns about tariffs and trade flows; strengthening of technology, talent and new capabilities; and growth into adjacent business sectors or activities,” he told the Asean media briefing on the EY Global Capital Confidence Barometer report.

The report was based on a biannual survey of 2,400 executives across 52 countries, including 185 from Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam.

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He said top investment destinations (cross-border and domestic) among SEA corporates were India, Singapore, Japan, Thailand and China.

Technology, advanced manufacturing, power and utilities, consumer, and financial services top the list of most acquisitive sectors, the survey revealed.

On key areas of outperformance, Vikram said respondents believe that organisations have outperformed in the areas of operational stability (66 per cent), digital transformation (54 per cent), and engagement with local communities (53 per cent).

“They need to continue to sharpen strategic focus, embrace the power of digital transformation, actively engage with their customers and stakeholders, and positively contribute to the communities in which they operate,” he said.

From the Malaysian perspective, EY PLT partner (transaction advisory services) Preman Menon said the M&A activity in the country is expected to gain momentum as companies start to position themselves and invest during an economic upturn.

“Private equity (PE) is expected to feature strongly as most respondents believe that PE will be the major acquirer of assets, in line with available PE ‘dry powder’,” he said.

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Hence, he expects acquisitions would centre around bolt-on acquisitions and an increased focus on acquiring operation capabilities.

Furthermore, he said partnerships would potentially be a new dynamic that will be fast-growing as Malaysian respondents appear to open up to partnering with competitors to create a new eco-system solution.

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