M&A activities set to increase as privately held businesses anticipate the return of financial and trade buyers 

M&A activities set to increase as privately held businesses anticipate the return of financial and trade buyers

Singapore 10 February 2010 - With the whiff of economy recovery in the air and privately held businesses (PHBs) are more confident that the upturn has started or will take place during the course of 2010, the latest findings coming out from the Grant Thornton International Business Report (IBR) which has been surveying the views of privately held businesses (PHBs) for 18 years; found that globally 10% of respondents expect a change of ownership in their business in the next three years compared with 6%  twelve months ago. Of those, 27% anticipate selling to a trade buyer compared to only 18% last year, and 25% to a financial investor (22% in 2009). See chart Fig 2 below.

Despite an improving business environment, PHBs are treading with caution when asked about their intentions for acquisitions. The survey revealed that globally businesses considering this route to expansion fell from 37% to 26%. This same cautious approach is also reflective of Singapore PHBs;  32% in 2009 to 21% in 2010.  (Fig 1)

Commenting on the findings, Kon Yin Tong, Director of Grant Thornton Corporate Finance Pte Ltd said, “This is not surprising as PHBs wanting to grow through M&A are naturally cautious. For businesses that do have cash resources, the combination of a brighter global economy and comparatively low valuations is throwing up interesting acquisition opportunities not only for domestic transactions but also for cross-border deals.”

He added, “Over the last 18 months, many businesses have taken actions to reduce costs. 2010 is likely to see some stronger PHBs undertaking strategic acquisitions or mergers to drive further efficiency, resume growth and enhance margins.  For home grown PHBs, acquiring global brands, gaining access to overseas markets and leveraging new technologies can offer a whole new spring board of opportunities.”

Grant Thornton member firms are reporting a clear revival in M&A activity, a change evident both in the number of transactions being completed and in the general shift in mood. According to the findings, access to new geographic markets (57%) and build scale (48%) are key drivers behind M&A.

Regionally, North America, Latin America and the Nordic countries top the league table (all at 32%) with more plans to grow through acquisitions. On a country level, Poland ranks highest with 66% planning to grow through acquisitions in the next three years. Whilst domestic acquisition is the top choice (84%) for businesses considering M&A, it is interesting to note that businesses in Mexico expect to grow through cross-border acquisitions, the highest percentage (65%).

 The study also revealed that compared with the global average of 7%, more Singapore PHBs (11%) are keen to undergo a public listing in the next three year. Regionally the listing action is lead by BRIC economies (15%) followed by Asia Pacific 12%. On a country level India tops the ranking with 33% expecting to undergo a public listing in the next 3 years.