Guide for Mergers and Acquisitions in Singapore

Nora Setiawan

December 15, 2020

As we have already known, Singapore is having a good reputation for economic growth in Southeast Asia, and even around the world. Thus, many foreign companies would like to enter the market there. One of the strategies that can be done is through Mergers and Acquisitions (M&A). In this article, we will introduce you to a guide for M&A in Singapore, so you will know the useful tool for corporations to venture the business internationally. Let’s find out!

READ MORE: How Viettonkin Consulting can help you prepare for mergers and acquisitions activity.

Overview of Mergers and Acquisitions by Value and Industries

Since 1985, more than 16.139 M&A transactions have been announced with a value of almost 849.67 billion USD, and it is over 925 deals with a total value of more than 78 billion. 

In January 2018, there were 54 transactions with a value of 2.30 billion USD which represented the highest number of deals in March 2011 with 103 announced deals and a value of 3.75 billion USD. 

In the year of 2019, M&A in Singapore was entering a healthy phase, even though there was a lower level of deal activity compared to 2018 and 2017. The Singapore M&A market registered 630 deals, valued at a total of USD72.4 billion in November 2019.

The industry with the largest M&A activity in terms of transaction value has been in the financial sector. It represented 16.8% of all deals with a total value of 753 billion USD. The second largest industry by value is the materials sector with 558 billion USD worth of transactions. The industrial industry reached the third rank with 527 billion USD.

M&A Activity and Trend in Singapore

Mergers and Acquisitions situation in Singapore

Singapore’s M&A activity in 2019 has a total of approximately 35.3 billion USD, with a total deal count of 134, which was up approximately 125.6% from a year ago.

At the beginning of 2020, an unexpected challenge due to COVID-19 outbreak. The global markets have plunged, heavy losses on Wall Street as the outbreak triggered a sharp global economic downturn. However, the stock market in Singapore has fallen to a ten-year low as of mid-March 2020, following the global rout that saw the US stock market recording their biggest one-day loss since the 1987 market crash.

M&A trends in Singapore saw significant private equity and venture capital deal activity in 2019 increased. Additionally, the technology remained the most active sector in 2019. Singapore’s start-up ecosystem is now flourishing with over 220 venture capital deals per year that is worth close to 4.2 billion USD. Singapore’s Finance Minister stated in the 2019 Budget Speech, there were more than 150 global venture capital funds, incubators, and accelerators that are based in Singapore.

The private equity and venture capital funding that has fueled M&A activity in the SEA region is expected to continue growing.

The Mergers and Acquisitions Scheme in Singapore

The M&A scheme offers benefits for companies that acquire shares in a target company. The scheme is also applicable to Singapore registered companies that acquire the ordinary shares to a target company, either directly or through wholly-owned subsidiaries.

According to M&A scheme, the government will grant the following benefits to an acquiring company, such as, an M&A allowance, which is calculated on the total cost of the acquisition of shares in the target company, second is a stamp duty relief, and the last is Double Tax Deduction (DTD) on the transaction cost.

The M&A allowance is a tax allowance granted to the acquiring company for each year of assessment (YA). Furthermore, the allowance granted is equal to 25% of the total acquisition value for each YA, with a purchase consideration cap fixed at $40 million.

Meanwhile, the stamp duty relief covered at $80.000 for each financial year, and the DTD on transaction costs which earned during the share acquisition process. These transaction costs include legal fees, professional fees, valuation fees, and so on. For this deduction, the cap on the transaction cost is $100.000.

Mergers and Acquisitions Structure and Regulation in Singapore

This part is about the acquisitions of owned companies that are structured in Singapore’s jurisdiction. However, the acquisition of shares or the business and assets or privately owned company is affected by the sale and purchase agreement between the relevant parties. 

Acquisitions may also be structured as put-and-call arrangements, but are less common. The acquisition of privately-owned companies can also be structured by way of a contractual offer, which is followed by a scheme of arrangement under section 210 of the Companies Act or the statutory amalgamation procedures under section 215A of the Companies Act.

Furthermore, the transaction process depends on the complexity of the issues, the type of your business, the number of parties involved, and whether the transaction involves a bilateral negotiation or formal auction sale process. The parties will typically enter into a confidentiality or non-disclosure agreement at the outset of the acquisition transaction.

The laws regulate the acquisition in which parties are generally free to negotiate the terms and conditions of the sale and purchase agreement for private M&A transactions. In doing so, they would need to take into account the Companies Act that is applicable for all companies incorporated, registered or carrying on business in Singapore. 

The other statutes and regulations may be applicable or relevant to private M&A transactions, including those relating to the transfer of employees, data protection, ownership and transfer of real estate and competition. If the buyer of the seller is a company listed on the Singapore Exchange Limited (SGX), the SGX’s listing rules will also be applicable in relation to the acquisitions and disposals.

Moreover, parties are free to decide on the governing law of the transaction documents. Most transaction documents for the sale of Singapore companies are governed by Singapore law. The legal formalities and procedures are also for the transfer of shares, liabilities, business or assets that are subject to Singapore law. 

With these interesting M&A activities, schemes and regulation, many foreign companies decided to expand their businesses in the country through acquisitions. In conclusion, there are guides for you if you wish to do M&A in Singapore one day. However, if you are unsure or need assistance, you can contact us below. Viettonkin will always be ready to help you!

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