South-east Asia’s tech boom fuels record mergers and acquisitions

Dealmaking in the tech sector in Southeast Asia reached $ 19 billion in the first six months of 2021, the strongest start to the year ever driven by acquisitions of leading corporations Grab, Gojek and Sea.

According to data from Dealogic, mergers and acquisitions rose 114 percent compared to 2020, reflecting investor enthusiasm for one of the fastest growing internet markets in the world.

Southeast Asia is home to around 400 million internet users, and the digital economy is projected to hit $ 300 billion last year, according to a report from Google, Temasek, Singapore’s state-owned investment company, and consulting firm Bain.

If the announced deals are completed by the end of the year – including Grab’s merger with a special acquisition company that values ​​the SoftBank-backed startup at $ 40 billion – the volume would hit $ 75 billion, well above that $ 17 billion in 2020 and $ 23 billion in 2019.

Harry Naysmith, head of investment banking in Southeast Asia at Goldman Sachs, said the region’s tech economy “accelerated by 5 to 10 years” and sparked large-scale liquidity events like IPOs.

One of the largest deals was between Gojek and Tokopedia, the Indonesian tech group, to create a technology platform valued at more than $ 18 billion, the industry’s largest ever merger. But even without that deal and Grab’s Spac, dealmaking in 2021 is still well on its way to setting an annual record.

Digital banking and lending are the top sectors generating interest, said Varun Mittal, a Singapore-based partner and fintech specialist with professional services company EY.

This includes the takeover of the Indonesian bank Kesejahteraan Ekonomi by Sea, the gaming and e-commerce platform, in January. The size of the deal was not disclosed.

“We’re seeing fintech firms take over established companies to get access to government licenses and grow up to scale quickly,” said Mittal. “Southeast Asia will have 10-15 new digital banks in Singapore, Malaysia, the Philippines and Indonesia over the next three years, making this sector a critical investment destination.”

The telecommunications sector has also been popular as companies consolidate to gain economies of scale and improve ROI in 5G cellular networks, said Rohit Chatterji, co-head of Asia Pacific M&A at JPMorgan.

Celcom Axiata and Digi.com, the Malaysia-based companies, completed a merger this month to become the country’s largest telecommunications group.

Chatterji said companies were also looking for telecommunications towers monetization, including plans to “free up capital from infrastructure that can be leased and shared.”

Indosat Ooredoo, a telecommunications company headquartered in Indonesia, sold its wireless portfolio to Digital Colony, a US infrastructure company, for $ 750 million in March.

The big test for investors will be whether companies are able to go public. Bukalapak, the Indonesian e-commerce company, is set to go public in Jakarta next month. GoTo, the name of the merged company of Gojek and Tokopedia, and Grab are slated to be added to the list by the end of the year.

“If short-term capital market events go according to plan, a truly positive cycle should begin,” said Naysmith. “More investors will be looking at the Southeast Asian TMT. feel good [technology, media and telecom] the ability of the sector to generate returns. “

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