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M’sian firms continue to prove mettle on M&A scene

August 20, 2012

These companies are getting international attention with their cross-border acquisitions.

KUALA LUMPUR: Malaysian companies are continuing to prove their mettle and stamp their mark on the radar screens of international investors with their eye-catching cross-border acquisitions.

A recent report by the named several local “big guns” that are not only huge domestically but have successfully clinched international deals in their respective fields.

Petroliam Nasional Bhd (Petronas), Genting Bhd, Felda Global Ventures Holdings Bhd, Sime Darby, SP Setia, Malayan Banking Bhd (Maybank) are among the noteworthy names mentioned.

Commenting on the report, MIDF research senior vice-president and head Zulkifli Hamzah said many Malaysian companies were still on a sound footing even after the 2007 financial crisis.

“With the ringgit having appreciated, this had enabled many companies to make cross-border offers. Therefore it is possible that there may be more big merger and acquisition (M&A) deals forthcoming,” he told Bernama.

He added that M&A was an on-going feature of the corporate world, therefore, it was difficult to form an expectation on deal flows as most M&As were clouded in secrecy until they are announced.

Zulkifli said acquisitions were not only funded by cash or borrowings as they may also be partly funded by the issuance of new shares.

“Therefore, as long as the capital value of companies keeps on growing or is at least preserved, the incentive to acquire should be high. In this regard, the fact that the FTSE Bursa Malaysia KLCI keeps registering new highs of late is an important denominator in enabling M&A activities by Malaysian companies,” he said.

When asked on how Malaysian companies were dealing with different corporate cultures in the aftermath of an M&A exercise, especially with regard to integration, he said many acquiring companies usually retained the management of the target companies after acquiring them.

This is to ensure that any acquisition would not disrupt the day-to-day operations, he said.

“Differences in culture are inevitable. The challenge is to manage the differences in a non-disruptive way so that the synergistic benefits of the M&A can be realised,” Zulkifli said.

Meanwhile, Affin Investment Bank ice-president and head of retail research Nazri Khan said the active presence of Malaysian companies in M&A exercises may be due to the slower international businesses as a result of the European debt crisis.

“Local companies have experiences in global competition. Like CIMB Group and Sime Darby, they have expansive business networks and relationships outside,” he said.

Solid financial strengths

Dismissing the report’s claim that Asean companies, particularly Malaysian companies were usually defensive, he said the solid financial strengths of these companies and good liberalisation in Malaysia had allowed them to explore opportunities outside the country.

“The only thing that they don’t have is the technology capacity and expertise. Local MNCs should tie up with foreign companies as they can tap into each other and boost their future capability outside the region,” he said.

In the article, Petronas, which is in the midst of acquiring Canada’s Progress Energy Resources Corp amounting to roughly about US$5.8 billion, had emerged as the second largest merger and acquisition deal by a Southeast Asian company for 2011 and 2012.

As for Maybank, which acquired Kim Eng Holdings (Singapore) for US$1.386 billion January last year, it was placed seventh from a total 10 spot positions.

Another striking deal was by Sime Darby Bhd, which teamed up with SP Setia to acquire Battersea Power Station (photo), one of London’s most iconic landmarks.

The report said the European debt crisis had made some assets relatively cheaper for Southeast Asian firms.

It also said that besides having lots of cash to play with, Southeast Asian firms saw other advantages to scale up internationally.



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