The year that was: Major deals in 2022

Year-end M&A report

This year, economies continued to recover from the pandemic as countries started to fully open schools, businesses and institutions with little to no restrictions. However, the global economy faced new headwinds that disrupted the M&A space across all regions. Dealmakers faced several challenges as the cost of doing business was affected by geopolitical pressures and global supply chain issues that resulted from the Russia-Ukraine War. High inflation and interest rates also created financial concerns for dealmakers as companies reported lower profit margins due to high costs. These factors heightened the persisting uncertainties from the pandemic in global markets. The new conditions drove the business leaders to adapt and develop new strategies to win in the market.

Although deals slowed down in major markets like North America, Europe and China, multinational companies sought new market opportunities and refocused their investments in the emerging regions, such as the developing countries in Asia-Pacific (APAC). One such deal is the acquisition of Hong Kong-based Baring Private Equity Asia Group Ltd by Sweden’s EQT Holdings BV. As part of EQT’s current strategic priority to expand in the region, the US$7.4bn transaction is one of the largest M&A deals in APAC for 2022.

Southeast Asia

Major deals in Southeast Asia in 2022

Source: Mergermarket

Many investors have taken an interest in Southeast Asian markets as companies move from China and other APAC countries to reduce labor and manufacturing costs. In the first quarter of 2022, total deal value in Southeast Asia was US$19.2bn across 96 deals, recording a 20% growth from last year. By the end of the third quarter, total deal value amounted to about US$200bn from nearly 300 deals.

Total deal value and volume in Southeast Asia

(US$ in billions)

Source: Mergermarket
*based on quarterly and annual reports
*2Q22 is based on an estimate from Mergermarket
 

Top sectors in Southeast Asia

The telecommunications, media and technology sectors were the most active based on M&A volume, driven by the high business-to-business demand for data and software services. Dealmakers in the region continue to seek more efficient and digitized solutions to better utilize data assets and infrastructure, such as telco towers, for commercial gains. Other active sectors include energy, mining & utilities, industrials & chemicals, and financial services, with the focus on the emergence of renewable energy and industrial metals.

Countries with the highest number of M&A deals in the region were Singapore, Malaysia and Indonesia. The first two have been at the forefront of the region’s M&A space over the years, as two of the most active bidders in other Southeast Asian countries.

Across the region’s major deals in 2022, dealmakers primarily engage in M&A activities to:
 

2023 outlook and new policies in the Philippines

As the country’s regulations continue to adapt to further support M&A activities, public and private companies are capitalizing on this opportunity to expand and grow their businesses. Although the pandemic negatively impacted several companies, it also provided opportunities to build their capacity, restructure, and expand and grow their businesses. Private companies were forced to be open to investors to survive and finance their operations. Likewise, public companies either sold some of their assets or equity stakes to raise funds for their operations.

Dealmaking in the country will continue to be driven by both public and private companies. As the Philippine economy continues to open, post-pandemic acquisition opportunities are anticipated to take place for private companies. Public company takeovers will continue to be mostly negotiated and contractual for some acquisitions of stakes in listed companies.

The changing regulatory landscape may also present opportunities for companies and the country. As some amendments promote foreign investments in the country, these also allow full foreign ownership of certain companies in selected industries. Laws that will further drive foreign investments in the country include the Retail Trade Liberalization Law, Foreign Investment Act, and Public Service Act.

Hot sectors in the Philippines for 2023

The government and businesses are having a positive outlook for the upcoming year. With the current changes in regulations, deals with foreign investors are expected to increase. More businesses will be leaning towards sustainability practices as more consumers are now aware of the importance and benefits of being sustainable. As the situation in the Philippines slowly goes back to normal, businesses will continue to normalize their operations and pursue their expansion plans.

The year 2023 is expected to enjoy higher investor confidence in emerging industries, particularly in telecommunications, renewable energy, insurance, logistics and agriculture. With the expanding 5G connectivity, major companies will continue commercializing their assets to fund network expansion plans. The Philippines is estimated to require up to 4,000 new towers every year according to independent operator EdgePoint Infrastructure. Renewable energy firms, on the other hand, are expected to further increase their investments in alternative energy because of the country's moratorium on coal plants and the declining sources of coal.

Foreign investors have also eyed the insurance industry, with the recent discussions between the Philippine Insurers and Reinsurers Association (PIRA) and companies representing capital firms from Korea, Thailand and Japan. With the incoming increase in the minimum capital requirement changes from PHP900m to PHP1.3bn, PIRA has noted that M&A has become a major option for some insurers who will be unable to comply.

In the logistics sector, the market is expected to reach PHP1 trillion by 2024 driven by the government’s plans to expand the logistics capacity in the country. Such plans include the National Logistics Strategy, which has mapped out 455 priority infrastructure projects in the private sector for the industry. Dealmakers will also seek investments in agriculture following the emergence of agribusinesses and agricultural innovations, such as data-driven farming and automation.

Amid the rising inflation rate, food security issues and continuing geopolitical concerns, the Philippines is expected to grow gradually next year. The country’s growth will be driven by the amendments made by the government to further attract investments, initiatives from the government and national agencies to support the public and private sectors, and improvement of the business framework to align with international standards.

The recent disruptions have taught us to be adaptable and resilient. They have also shown us the growing importance of dealmaking in order to survive and thrive during challenging periods. To remain relevant and stay ahead of the competition, businesses need to consider how they can reinvent their operations, products and services. M&A activities will be a crucial factor in this transformation as they enable business to innovate and achieve exponential growth.