Southeast Asia M&A: Poised for a comeback in 2024?

Southeast Asia is one of the most dynamic and fastest growing regions in the world. Despite M&A deal volumes in the region declining apace with the global average in 2023, the region has been a bright spot in Asia-Pacific M&A and is poised for an uptick this year. Recent tailwinds from a rebound in consumer confidence, stabilized inflation, reducing interest rates, and a revitalized IPO market, as well steady structural growth drivers related to favorable demographics, all bode well for deal activity in 2024.

Several key drivers are likely to spur activity, notably:

Digital transformation across the region, including AI and other emerging technologies, has prompted companies to seek partnerships and acquisitions to stay competitive and gain technological advantages.

Renewables and Green Tech: Serious challenges regarding climate change and biodiversity loss are forming the impetus for continued investment in the renewables space, which is being driven by ESG considerations around energy transition, decarbonization, the circular economy, and social impact.

Local market consolidation is afoot as local players increasingly seek partnerships and acquisitions to stay competitive amidst the two mega trends mentioned above – something  we already started seeing more of late last year.

Strong financial investor appetite: Private funding decline from PE/VCs was a focus across headlines in 2023, but this overlooked the significant dry powder to be deployed in SEA, with over USD15 billion of committed capital as of 2022 year-end.

Regional conglomerate reinvention: Diversified conglomerates like Adaro, Phinma, Emtek, Astra, Sime Darby and Vingroup are expanding into new economy sectors, including green business, financial services, technology and healthcare and are also looking at non-core divestitures to stay competitive.

Government initiatives and support: In additional to GIC, Temasek and Khazanah, the region’s prominent sovereign wealth funds have seen new additions, including the Indonesia Investment Authority (INA) formed in 2021 and more recently, the Philippines’ planned launch of Maharlika Investment Fund (MIF). These funds aim to spur overall economic growth and bolster nationally critical industries. Several SEA governments are also making concerted efforts to relax investment restrictions, which will be a further boon for M&A.

Southeast Asia stands out as one of the fastest-growing regions globally. This year, amidst the key divers noted above, we expect renewables, green tech, healthcare, financial services, EVs and digital infrastructure to dominate the M&A market.