3 areas of growth in investment banking in Singapore

Investment banking in Asia has been affected by weak earnings forecasts in the profits of targets (thus resulting in fewer large deals), increased capital adequacy regulation from regulators (so less liquidity they can put into deals which results in a reduced risk appetite for deals) and the general weak macro economy. The confluence of these factors have could be part of the reason for the reduction in general merger and acquisition activity in Asia.

This article will highlight three potential new areas of growth in the investment banking business in Singapore:

Firstly, there is growth in the number of reverse takeover deals undertaken by Singapore listed companies acquiring mining and commodity trading assets outside Singapore. This is due to continuing demand for commodities from the large economies like China arising from the increasing size of the middle class populace in China. We have seen an increasing slew of reverse takeover transactions on the Singapore Bourse (whether on the Main Board or on Catalist) whereby a listed company will sell off its existing business and acquire mining companies or companies with mining and/or exploratory rights in China and Indonesia so as to allow such assets to be listed outside their country where they are located. As part of corporate strategy, investment banking houses should now focus on courting mining target companies in the South East Asian countries or in China for such deals.

Secondly, there is value in pitching a private equity synergistic transaction to large listed companies in Singapore. For example, a Singapore listed company, Rowsley (which is controlled by Billionaire Peter Lim) acquired a piece of land in Johor Malaysia and RSP Architects (a 56 year old architectural firm). This transaction of S$581 million looks like a spectacular piece of deal making and may provide the inspiration for more of such deals to come in Singapore.

Thirdly, Singapore has become a place for dot-com companies to list as well. Contel a Singapore listed company recently announced a reverse takeover deal whereby it would issue shares to the vendors of Yuuzoo in a deal worth S$582.3 million.

In conclusion, despite the dearth of large merger and acquisition deals against a lackluster global economy, investment bankers in Singapore can consider exploring the three growth areas in greater depth for the purposes of business development.