China has become the second biggest originator of M&A deals in 2016

M&A report

The global tech sector posted “strong” M&A results in 2016 and is “well-placed” to continue on disrupting other sectors through capabilities and business acquisitions, according to KPMG International‘s M&A Predictor report.

“Technology’s war chest continues to grow as net debt decreases by 147 per cent and EBITDA increases by
12 per cent. As a result, the appetite for deals in this sector is predicted to increase by an astonishing 121
per cent in 2017,” according to a press statement by the company.

While the US remain the biggest originator of M&A deals in the tech sector, China is following as the second biggest originator country and fifth biggest destination country.

“American and Chinese companies have focussed on cross-border deals to counter slowing growth at home and, in the case of China, to acquire technology and meet upgrading demand of domestic consumers,” said Philip Isom, Global Head of M&A, KPMG in the US, in the report.

“The slowdown in deal volumes was probably attributable to increased global uncertainty in the run up to the US presidential elections, the potential impact of Brexit, volatile currency markets and other geopolitical factors,” he added.

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Apart from China, Japan also contributed in the top five biggest deals in 2016 by SoftBank Group’s acquisition of UK-based ARM Holdings for US$31.7 million.

In general, the report stated that the volume and value of 2016 M&A transactions are decreasing from the “record-breaking” 2015, despite high volume deals across different sectors in Q4 2016. This is due to the economic and political uncertainty that had driven “anemic” volume in the first-half of 2016.

“… However, looming rate hikes and uncertainty around 2017 policy shifts helped to make Q3 and Q4 record quarters for mega-deals,” it stated.

Apart from tech, the energy sector had also been showing strength in the year 2016, with all top 10 energy deals valued over US$12 billion.

Also Read: A look into Asia’s tech M&A market with Finquest CEO Tanguy Lesselin

What’s in store for 2017

The report also predicted how M&A activities will fare this year, which is believed to be “mixed”.

Some factors that will be affecting corporate confidence are flat market capitalisations, announced tax changes, modest net-profit growth and ever-present geopolitical risk.

“2016 saw cross-border M&A activity remaining resilient after a slow first half in the face of economic and political uncertainty. We expect continued strong M&A activity in 2017, although geopolitical and economic risks
have the potential to hamper corporate confidence,” explained Benjamin Ong, Head of M&A at KPMG in Singapore.

But for countries such as Singapore, the prospect is predicted to remain promising.

“Singapore corporations have a strong capacity to transact on the back of prudent balance sheet
management and increasing cash reserves, allowing them to pursue and seize good opportunities. At the
same time Singapore remains an attractive platform for foreign investors looking to expand into Southeast
Asia given Singapore’s reputation for transparency, efficiency , stringent regulatory requirements and strong
protection of intellectual property,” Ong said.

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