Mergers and acquisitions (M&A) activity this year is easily outpacing the number of such deals struck in previous years.
There are 14 companies being taken private or bought out so far this year, up on the eight last year and the 14 announced for 2017, although four of those did not go through, according to DBS Group Research analyst Ling Lee Keng.
Mergermarket data also showed that Singapore is bucking the regional M&A downtrend, recording US$17.1 billion (S$23.2 billion) in deals in the first half of this year, up 154 per cent from the same period a year ago.
Recent premiums offered on M&A deals and privatisations have been attractive, said Ms Ling in a report released on Tuesday.
Companies that were privatised or delisted in the past three years had done so at an average premium of 15 per cent over their last transacted prices before the deals were announced. The premium so far this year is at 20 per cent, compared with 10 per cent last year and 12 per cent in 2017.
This gives shareholders an opportunity to realise their entire investment, often at a premium to the prevailing market price, an option which may not otherwise materialise, Ms Ling noted.
Real estate investment trusts (Reits) and companies in the technology, food and beverage (F&B) and healthcare sectors are likely to ride on this M&A and privatisation wave, she said in the report.
The merger of OUE Commercial Reit and OUE Hospitality Trust is a sign that Reit managers are taking steps towards increasing their assets under management and market capitalisation to gain visibility among investors, Ms Ling added.
DBS expects this trend to continue, especially for mid-cap industrial Reits such as AIMS APAC Reit, Cache Logistics Trust and Soilbuild Business Space Reit.
These are trading at attractive yields in excess of 7 per cent to 8.5 per cent, which prohibits them from pursuing accretive acquisitions, given the high cost of capital, Ms Ling said.
She noted that suppliers in the tech space will need to reassess their strategies to survive in the challenging environment, given that margins have been hit and visibility remains low amid the trade war.
Ms Ling tipped that Hi-P International, Fu Yu, Spindex and Sunningdale will be potential targets.
F&B companies with strong brand equity are also highly sought after. Fruit distributor SunMoon Food, bread manufacturer QAF and chocolate-maker Delfi may be on the radar screen of potential buyers.
In the healthcare sector, smaller listed players could consolidate.
Ms Ling pointed to Singapore O&G, eye care provider ISEC, oncology and stem cell firm Talkmed, and Asian Healthcare Specialists (AHS) which provides orthopaedic, trauma and sports services.
AHS said yesterday morning that it is eyeing a 51 per cent stake in Cornerstone Asia Health.
Separately, SIA Engineering’s share price spiked yesterday, which two other DBS analysts said could have been fuelled by renewed talk that Singapore Airlines may privatise the company.