16-7-2024 (KUALA LUMPUR) In a year marked by challenges for dealmaking in the Asia-Pacific region, Malaysia has emerged as a bright spot, witnessing a remarkable surge in mergers and acquisitions (M&A) activity. According to data compiled by Bloomberg, the volume of M&A transactions in the country has soared by 87% from a year ago, reaching an impressive US$8.3 billion, while the Asia-Pacific region as a whole experienced a 15% decline.
Leading the charge is a high-profile 12 billion ringgit ($2.6 billion) buyout of Malaysia Airports Holdings Bhd, involving Global Infrastructure Partners (GIP) and Abu Dhabi Investment Authority. However, the deal has faced opposition in Muslim-majority Malaysia due to BlackRock Inc’s ties to Israel, after the investment management firm agreed to acquire GIP in January.
Senior investment bankers anticipate that the elevated deal activity will continue as both local and international buyers seize opportunities in the Malaysian market. The technology sector, in particular, has proven to be an alluring prospect, with global giants such as Alphabet Inc-owned Google, Microsoft Corp, and Nvidia Corp announcing plans to invest billions of dollars to support Malaysia’s ambitions in artificial intelligence (AI). Additionally, the government has pledged at least 25 billion ringgit for the semiconductor industry.
“We are seeing a lot of inbound interest from regional and international clients wanting to discuss opportunities in Malaysia,” said Harry Naysmith, a managing director at Citigroup Inc’s investment banking unit.
As a member of the Association of Southeast Asian Nations (ASEAN), Malaysia has drawn interest from investors seeking alternatives to China. The country attracted 83.7 billion ringgit of approved investment in the first quarter, a 13% increase from a year earlier. This trend is expected to continue, bolstered by an agreement with Singapore to develop Southeast Asia’s first cross-border special economic zone.
Chinese firms are also increasingly eyeing acquisitions in Malaysia, according to Ai Chin Tan, a managing director and head of investment banking for Oversea-Chinese Banking Corp in Malaysia. Strong links between the two countries make Malaysia an attractive hunting ground for Chinese firms, particularly in areas such as advanced manufacturing, renewable energy, and electric vehicles.
“Malaysia has prospered through the proliferation of many entrepreneurs who own small-to-mid-sized firms as well as larger companies and conglomerates, presenting good opportunities for M&A,” Tan said.
The current environment is favourable for dealmaking in Malaysia, thanks to the country’s recently-achieved political stability and the strong performance of local equities. The FTSE Bursa Malaysia KLCI Index has risen 12% in 2024, outperforming the MSCI Emerging Markets Index, which is up 9.7%.
“Sponsors have been looking for the right window to exit companies, and with the current economic and political stability, the timing is ripe,” said Naysmith, who is based in Singapore and focuses on clients in ASEAN.
While countries like India, Japan, South Korea, and Singapore continue to attract international attention due to their market size and depth, Malaysia’s robust M&A activity highlights its growing appeal as an investment destination.
The government’s plans to build advanced manufacturing capabilities and increase the country’s renewable energy capacity further contribute to its attractiveness. Additionally, while initial public offerings (IPOs) are muted globally, share sales in Malaysia this year have risen 35% from a year ago, led by Johor Plantations Group Bhd.
“There is a growing pipeline of activity in the country, and we should begin to see bigger IPO deals from Malaysia in the next 12-18 months, particularly around government-owned entities and sectors such as consumer, healthcare, telecom infrastructure, and technology,” Naysmith said.
Meanwhile, tycoon Vincent Tan is considering taking private Kuala Lumpur-listed Berjaya Food Bhd, the owner of Starbucks Corp’s Malaysian business, according to Bloomberg reports.
Malaysia, with a population of about 34 million, has attracted private equity firms such as CVC Capital Partners Plc, which has invested in areas like financial services and retail, and TPG Inc in healthcare and education.
“With a more stable macroeconomic environment, including interest rates and improving financing conditions, we do expect to see M&A activity remaining strong,” said Tammi Yong, JPMorgan Chase & Co’s head of investment banking for Malaysia.
The country, which is the world’s second-biggest palm oil producer after Indonesia and home to industry leaders such as Petroliam Nasional Bhd (Petronas), Top Glove Corp, Axiata Group Bhd, and the sovereign wealth fund Khazanah Nasional Bhd, has also witnessed significant interest in digital infrastructure assets, particularly data centers.
GDS Holdings Ltd agreed to sell a stake in its data-center business outside of China, which includes assets in Malaysia, to alternative asset managers Hillhouse Investment and Boyu Capital for $587 million. Last year, DigitalBridge Group Inc bought a controlling stake in Aims Group from Time Dotcom Bhd.
“This is likely going to remain a hot topic in the coming years due to Malaysia’s proximity to Singapore and because it has the resources needed to run data centers, including water and electricity,” said Roe Seann Chong, an executive director at Deutsche Bank AG’s investment arm in Malaysia.
Malaysian corporates with diversified operations are also reevaluating their strategies, potentially creating market leaders in more focused businesses through M&A transactions. Axiata plans to merge its telecom operations in Indonesia with conglomerate PT Sinar Mas Group, while AirAsia recently announced a 6.8 billion ringgit deal to create a listed entity that will combine its airline units.
Malaysian firms are also keen to expand abroad via M&A, according to Hsu Jen Chin, who leads investment banking in Malaysia for CLSA Ltd.
“A lot of the corporates that we talk to have overseas expansion aspirations,” she said. “They want to be at the same level as all the other international players, and they’re always looking for opportunities to grow.”
