A study of Malaysia's merger and acquisition (M&A) activities at the onset of this pandemic reveal an increasing trend for small and bolt-on acquisitions as the most popular approach among Malaysian businesses. This trend is driven by large companies aiming to strengthen their market position, as well as private equity players' appetite for bolt-on acquisitions that are complementary to their platform investee companies.
The study, which was conducted by KPMG Corporate Advisory and Zaid Ibrahim & Co (a member of ZICO Law), also found that companies hard hit during the pandemic looked towards M&A to diversify beyond their core revenues in an attempt to enter industries with better economic prospects and to generate more consistent cash flows.
Emily Choo, Head of Corporate Finance at KPMG in Malaysia anticipates additional scrutiny is to be expected in the due diligence process especially in the current climate of economic uncertainty.
"Many business leaders identified the need for accurate forecasting as one of the challenges in the M&A process. Buyers and sellers may hold opposing views on the impact of Covid-19 on business operations. As a result, buyers find it challenging to forecast growth, and these differences in perception and opinions may lead to a valuation gap," she added.
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– Focus Malaysia: Bolt-on acquisitions seen to drive growth for businesses in Malaysia