Malaysia’s financial services sector sees significant growth in M&A

A total of 31 disclosed transactions in the sector with a total value of RM6.9b was observed by the end of 2021 

by S BIRRUNTHA / PIC by MUHD AMIN NAHARUL

THE Malaysian financial services sector has experienced significant growth in mergers and acquisition (M&A) activity across the AsiaPacific region, according to KPMG Malaysia. 

Head of advisory Chan Siew Mei said within Malaysia, a total of 31 disclosed transactions in the financial services sector with a total value of US$1.63 billion (RM6.88 billion) was observed by the end of 2021. 

She added that since the pandemic, Malaysia’s business landscape has undergone significant changes as businesses sought to re-examine and optimise their corporate portfolios in the pursuit of growth and recovery. 

Chan noted that one way has been via M&A, which experienced an upsurge in 2021, observed by KPMG in Malaysia. 

“While M&A activity experienced a minor ‘slump’ in 2020, we observed a steady rebound across all sectors in 2021 that can be attributed to delayed closings and stronger investor confidence. 

“We anticipate this momentum to continue through 2022 even as Malaysia transitions towards the endemic phase beginning April 1. 

“Deal-making is a key component in driving business strategy, and more businesses today recognise that,” she said in a statement yesterday. 

According to Chan, some recent high-value deals signal opportunities within the financial industry landscape. 

She said, for example, the asset management subsector retains interest from local and international investors. 

Recently, in a deal valued at US$367 million, Affin Bank Bhd had agreed to transfer its controlling stake in Affin Hwang Asset Management Bhd to Luxembourgbased private equity fund CVC Capital Partners. 

She noted that this continued interest could bode well for unit trust funds and Islamic funds, which have both historically seen significant growth in the market. 

Chan said the insurance subsector has also seen significant growth, with significant deals totalling US$856 million in the past year attributed to acquisitions of local insurance companies by Italy’s Assicurazioni Generali and America’s Liberty Mutual Insurance Co. 

“This sector might see more |consolidation, particularly in the acquisition of Malaysian insurers by foreign multinationals, as global insurers continue to seek expansion of their operations through cross border M&A,” she added. 

Meanwhile, Chan also highlighted that Malaysia’s fintech and digital banking sectors have also benefitted from the uptick in M&A activity, fuelled by the high rate of digital adoption and increased usage of e-wallets. 

She said within the fintech sector, companies have capitalised on the shift to digital for both businesses and consumers alike. 

She cited AirAsia Digital’s fintech unit, BigPay, which raised US$100 million in financing from the South Korean conglomerate SK Group and Fave, an e-commerce and loyalty platform, which was acquired by merchant commerce platform Pine Labs for US$45 million. 

Additionally, Chan also noted that Bank Negara Malaysia is set to issue up to five digital banking licences by the end of this month. 

She said the 29 applicants for the digital banking licence included several digital banking consortiums, comprising banks and non-bank companies. 

The central bank is also currently laying the groundwork for the issuance of digital insurer licences, which would allow insurance companies to offer products and services purely through digital channels without having physical or offline contact points. 

“We have already seen some notable M&A deals to date within the financial services sector, and we can expect discerning businesses to seize further M&A opportunities within this sector. 

“Investors are more confident now in planning for the long-term, and we anticipate more exciting prospects will arise in the years to come,” she added. 

However, Chan advised that it pays to be cautious of challenges arising from current geopolitical tensions and the global supply shocks it incurs as this could hinder both the buying and selling process. 

She said businesses will do well to employ more scrutiny in their due diligence prior to exploring new deal opportunities.