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M&A Uptrend

The pace of mergers and acquisitions (M&As) in Malaysia, which has been affected by the COVID-19 pandemic, is expected to gain momentum going into the second half of the year.

PETALING JAYA, 1 March 2021 - According to experts from professional services firms, the positive momentum is expected to be supported by low interest rates, accommodating capital markets and ample private capital environment.

Although the number of M&A deals in the country may not be as high as in 2019, it is expected to pick up steam this year.

Experts also opined that the M&A landscape could return to the pre-Covid 19 pandemic levels in 2022.

Mergermarket, a specialist in M&A intelligence, has reported that Malaysia’s M&A deal volume in 2020 (59 deals) ranked third after Singapore (217 deals) and Thailand (65 deals).

It pointed out that Malaysia’s M&A volume was driven by the manufacturing, industrial and consumer sectors, among others.

Meanwhile, Singapore’s M&A volume is driven by technology, financial services, and business services sectors, while M&A in Thailand was supported by the consumer, energy, mining, and utilities sectors.

Deloitte Malaysia’s M&A leader Yap Kong Meng told StarBiz that the M&A volume should pick up in the first half of the year and perhaps with a stronger momentum in the second half as the effects of the vaccine permeates the population.

“Deals are already brewing in the later part of the second half of 2020 as corporations develop clear views on how to navigate the pandemic and not maintain a wait and see stance.

“At the same time, deals disrupted by the onset of the pandemic in March last year and subsequent lockdowns are starting to progress again in 2021.

“We do see that the common drivers of past M&As are driving the volume for 2021. For example, we still see corporations, local and foreign corporations operating in Malaysia, making expansionary acquisitions and divesting non-core operations to enter adjacent businesses, ” explained Yap.

He noted that foreign corporations continued to show interest in investing in Malaysia even at the height of the pandemic.

However, the continued restrictions in travel and communications would likely slow down the progress of deals, Yap said.

Another key M&A driver that was expected to play out more this year would be corporations, operating in affected sectors, that would sbe looking to divest in order to continue shoring up their own balance sheet and repositioning into new adjacent businesses.

Adjacent businesses will include those related or complementary to the core business of the “acquiror.”

Yap said this is particularly so given that the loan moratorium has ended and full recovery from the pandemic will be gradual.

The views and opinions expressed in this article are those of Yap Kong Meng, M&A Leader, Deloitte Malaysia.

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