The value of deals taking place in Southeast Asia reached a new high in the first half of 2021. Deals worth US$101.6 billion changed hands—a six-month total overtaking all annual totals on record. Meanwhile, deal volume stands at 209, up 32 deals on H1 2020.
The record value was driven by a string of megadeals within the tech sector, with 10 deals valued over US$1 billion taking place.
Singapore storms ahead
The largest of these was the merger between SoftBank-backed “super app” company Grab and US-listed SPAC Altimeter Growth. With a value of US$34.7 billion, the deal was the highest valued SPAC on record when it was announced—a significant milestone for Southeast Asia’s startup community.
As part of the transaction, Altimeter Growth Corp is raising US$4 billion from a number of funds including BlackRock, T Rowe Price, Fidelity, Janus Henderson, Mubadala and Temasek.
Following completion of the deal, Grab is set to list on the New York Stock Exchange. Southeast Asian companies are historically underrepresented on US stock exchanges.
Largely as a result of the merger, Singapore’s M&A activity value reached US$52 billion in H1, overtaking all annual records. Volume increased by 16 deals year on year to a total of 63, reflecting the buoyancy in the market.
There’s no sign of the trend abating. Already in Q3, Singapore-based fintech company FinAccel has agreed to go public in the U.S. through a merger with a SPAC, VPC Impact Acquisition Holdings. The transaction values the combined companies at US$2.5 billion.
Startups fuel TMT dealmaking
Technology, media, and telecom (TMT) was the most targeted sector for dealmaking in Southeast Asia—in terms of both value and volume. A total of 45 TMT deals valued at US$74.9 billion was a huge leap from the US$2.1 billion announced in H1 2020, while accounting for 17 more deals. Four of the top five deals in H1 took place within the sector.
While the previously mentioned Grab deal accounted for almost half of H1’s deal value, smaller but still significant megadeals helped push the total skywards. The ecommerce sector was particularly active, with ride hailing giant Gojek merging with online marketplace Tokopedia in a deal valued at US$7.6 billion.
The combination of Indonesia’s two largest startups will form GoTo Group, providing food delivery, ride-hailing and ecommerce services. With an estimated valuation of US$18 billion, the newly created company will be Indonesia’s largest technology group. The merged company is said to be preparing for a dual listing in Indonesia and the US later this year, targeting a public valuation of up to US$40 billion.
The deal, announced only the month after the Grab merger, will enable GoTo Group to compete with the Softbank-backed super app, along with other regional rivals such as Tencent-backed ecommerce platform Shopee.
Fundraising activity accelerated during the first half of the year as investors sought to take advantage of shifting consumer habits post-pandemic. Demand for digital services such as fintech and ecommerce has skyrocketed, causing a steady stream of investment in Southeast Asia’s tech sector.
The largest such deal in H1 was the US$1.8 billion investment in Indonesian courier start-up J&T Express by CMB International Capital Corporation Ltd., ATM Capital, Boyu Capital Advisory Company Ltd., Hillhouse Capital Management and Sequoia Capital.
Rising demand had boosted the startups’ profits during the COVID-19 pandemic. Delivery orders increased by 40% at the start of the pandemic as consumers switched their shopping habits online.
In another investment driven by shifting consumer habits, Singapore-based retail startup Trax raised US$640 million from investors led by SoftBank Investment Advisers, along with existing and new investor BlackRock Private Equity Partners, Sony Innovation Fund and OMERS Capital Markets.
Trax will use the funds to invest in its flagship product Retail Watch, which uses a combination of computer vision, machine learning and automation technology to gather real-time data surrounding in-store product availability, helping stores manage their inventory, merchandising and operations. Such technologies aim to help retail companies manage the surge in online shopping spurred by the pandemic—a trend which is expected to continue long after COVID.
A bright digital outlook
Southeast Asia’s digital economy is booming. According to a report published by Google, Temasek and Bain in 2020, the region is home to 400 million internet users, with the digital economy projected to hit US$300 billion by 2025. This vast and untapped potential will continue to lure investors to the region.
Heightened investor appetite is proved by the largest-ever SPAC deal—the listing of Grab—taking place in the region.
With such high demand, and the COVID-19 pandemic fundamentally altering consumer habits, the region looks set to continue its winning dealmaking streak in the second half of the year.