PETALING JAYA, 21 March 2022 — Since the pandemic, Malaysia’s business landscape has undergone significant changes as businesses sought to re-examine and optimize their corporate portfolios in the pursuit of growth and recovery. One way has been via mergers & acquisitions (M&A), which experienced an upsurge in 2021, observed KPMG in Malaysia.

“While M&A activity experienced a minor ‘slump’ in 2020, we observed a steady rebound across all sectors in 2021 that can be attributed to delayed closings and stronger investor confidence. We anticipate this momentum to continue through 2022 even as Malaysia transitions towards the endemic phase beginning 1 April. Deal-making is a key component in driving business strategy, and more businesses today recognize that,” says Chan Siew Mei, Head of Advisory at KPMG in Malaysia.

In particular, Siew Mei noted the financial services (FS) sector has experienced significant growth in M&A activity across the Asia Pacific region. Within Malaysia, a total of 31 disclosed transactions in the financial services sector with a total value of USD1.63 billion was observed by end 2021.[1]

Some recent high value deals signal opportunities within the landscape. For example, the asset management subsector retains interest from local and international investors. Recently, in a deal valued at USD367 million, Affin Bank Bhd had agreed to transfer its controlling stake in Affin Hwang Asset Management Berhad to Luxembourg-based private equity fund CVC Capital Partners[2]. This continued interest could bode well for unit trust funds and Islamic funds, which have both historically seen significant growth in the market.

The insurance sub-sector has also seen significant growth, with significant deals totaling USD856 million in the past year attributed to acquisitions of local insurance companies by Italy’s Assicurazioni Generali[3] and America’s Liberty Mutual Insurance Company[4]. This sector might see more consolidation, particularly in the acquisition of Malaysian insurers by foreign multinationals, as global insurers continue to seek expansion of their operations through cross border M&A.

FS sector gets boost from digital adoption and M&A

Malaysia’s fintech and digital banking sectors have also benefited from the uptick in M&A activity, fueled by the high rate of digital adoption and increased usage of e-wallets.

Within the fintech sector, companies have capitalized on the shift to digital for both businesses and consumers alike. An example is BigPay, the fintech unit of AirAsia Digital, which raised USD100 million in financing from the South Korean conglomerate SK Group[5] and Fave, an e-commerce and loyalty platform, which was acquired by merchant commerce platform Pine Labs for USD45 million[6].

Meanwhile, Bank Negara Malaysia is set to issue up to five digital banking licenses by end of March 2022[7]. The 29 applicants included several digital banking consortiums formed of banks and non-bank companies. The central bank is also currently laying the groundwork for the issuance of digital insurer licenses, which would allow insurance companies to offer products and services purely through digital channels without having physical or offline contact points.

“We have already seen some notable M&A deals to date within the FS sector, and we can expect discerning businesses to seize further M&A opportunities within this sector. Investors are more confident now in planning for the long-term, and we anticipate more exciting prospects will arise in the years to come.

However, it pays to be cautious of challenges arising from current geopolitical tensions and the global supply shocks it incurs as this could hinder both the buying and selling process. Businesses will do well to employ more scrutiny in their due diligence prior to exploring new deal opportunities,” advises Siew Mei.