Regional companies see stable M&A desire driven by new markets, tech and talent

PC Lee

SINGAPORE (Nov 12): Companies in the region have relatively stable appetite for M&A activity, a recent EY survey has found.

This despite coming under pressure from higher input costs, thinning margins and an increasingly slowing economy.

Forty-one percent of executives in Southeast Asia say they are eyeing some acquisition deals over the next 12 months, according to the 21st edition of the EY Global Capital Confidence Barometer (CCB).

Though the M&A desire is lower than the global average of 52%, this is just below the 10-year historical average of 42% for the region, since the start of the study in 2009.

The EY survey also found that the top drivers for pursuing acquisitions were access to new markets; acquisition of technology, new production capabilities or innovative startups; and acquisition of talent.

Conducted in August and September, the CCB is a biannual survey of more than 2,900 executives from 45 countries, including close to 220 in Southeast Asia including Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam.

According to the survey, 45% of regional respondents -- compared to 65% globally -- plan to allocate more than 25% of their total investment capital to technology, mostly solutions that drive top-line growth. And more than half of executives are investing in technology through acquisition, joint ventures or external venture funds.

Meanwhile, more than two-thirds of respondents are experiencing difficulties securing the right skills and talent. In particular, 26% of companies faced the biggest challenge with hiring or retaining talent with specific technical skills relevant to the core business. This compares to 37% globally.

Nevertheless, 61% of executives do not expect an economic downturn in the near- to mid-term, compared to 54% of global respondents who shared similar sentiments.

Vikram Chakravarty, EY Asean Transaction Advisory Services Leader, says: “Perhaps Southeast Asian firms should take the current slowdown and trade tensions more seriously. The macroeconomic headwinds are real, and firms must seize this opportunity to restructure themselves to focus on the business and reduce costs while they still have strong balance sheets. This could also present an opportunity for them to shed lesser-performing business units and acquire relevant assets and capabilities.”