MALAYSIA’S transition to the endemic phase of Covid-19 and the reopening of the country’s borders will bode well for merger and acquisition (M&A) activities and privatisation deals this year. 

KPMG Malaysia ED and deal advisor Tham Kin Son said businesses are increasingly recognising strategic acquisition as a key to continued and accelerated growth.

“We also see monetisation opportunities with principals adopting the path of a trade sale, whereby the business’ next chapter of growth will be defined by strategic partnerships,” Tham said in an email reply to The Malaysian Reserve (TMR).

Several sectors are likely to attract M&A activities this year including the industrial and consumer sectors, he noted.

“We should see the most opportunities in the industrial and consumer sectors. There should be pockets of activity within the healthcare, technology and education sectors as well,” he added.

Financial services are expected to continue to be dominated by large ticket deals under a consolidation thematic.

Tham foresees strong pricing multiples in M&A deals this year judging from the recent transacted Malaysian assets in the mid-market space.

However, there will be some headwinds that could expose the deals and privatisation to several downside risks.

“Uncertainties around the political landscape, rising interest rates, creeping inflation, as well as challenges faced by businesses such as supply chain disruptions, increasing raw input and freight costs and labour crunch are all potential deal impediments,” he added.

Nevertheless, he views businesses with strong fundamentals and a good growth trajectory will attract potential suitors despite the risks.

Deloitte Malaysia M&A leader Yap Kong Meng said Malaysia’s M&A deal volume from March 2022 has been trending at about the same levels as last year.

“We expect rising interest rates globally to potentially cause the deal volume to trend lower towards the end of this year,” Yap tells TMR.

Yap stated that among the sectors that are most likely to experience M&A and privatisation deals this year are technology, media and telecommunication, consumer, energy and resources as well as manufacturing.

“These sectors will continue to be active and represent most of the M&A deals completed for this year, a trend similar to the last two years,” he said.

He expects companies and individuals that are targeting to undertake M&A and privatisation deals this year will continue to have high-value expectations, as the trend shown since last year. 

“This could be challenging as central banks globally move to raise interest rates in response to inflationary pressure,” he said.

In 2021, notable acquisitions were undertaken by plantation companies with the Kuala Lumpur Kepong Bhd’s (KLK) acquisition of a 56.2% stake in IJM Plantations Bhd from IJM Corp Bhd for RM1.53 billion the most notable.

KLK’s parent company, Batu Kawan Bhd, also made a lucrative deal last year with the acquisition of Permodalan Nasional Bhd’s 56.32% stake in the Chemical Co of Malaysia Bhd.

Both M&A deals concluded with the delisting of the acquired companies as other shareholders accepted the mandatory general offers made by the acquirers. — by ANIS HAZIM/graphic by TMR