[INTERVIEW] 'Tech, AI, logistics, automation sectors to be key areas of Korea-SEA investment deals'

PwC Singapore Mergers & Acquisitions and Private Equity Leader Ling Tok Hong / Courtesy of PwC

PwC's Korea-Singapore deal center facilitates M&A opportunities between Korea, Southeast Asian countries

By Anna J. Park

In the wake of COVID-19, the global mergers and acquisitions (M&A) market has grown exponentially to meet a greatly transformed business environment, such as deepened digitalization and efficient logistics. Southeast Asian countries have also witnessed significant growth in M&A transactions in the years following the pandemic outbreak. Businesses' increased tendency to relocate manufacturing operations from China to Southeast Asia as well as further migration of funds to Singapore have helped the rise of M&A and private equity (PE) investments in the region.

During a recent one-on-one talk with The Korea Times, PwC Singapore's M&A and PE Leader Ling Tok Hong explained such unique features of the M&A and PE markets in Southeast Asia as well as the opening of PwC's Korea-Singapore deal center earlier this year.

Ling is one of the most prominent figures of the global accounting firm's operation in Singapore and Southeast Asian countries. Ling has built a decades-long career at the firm, spanning across the entire range of a deal spectrum, from lead financial advisory, due diligence and deal negotiation to post-deal integrations and value creation. Under Ling's lead, PwC has worked alongside numerous global and regional PE firms in Singapore for close to two decades, and the global firm has consistently been placed as the leading M&A adviser in the deals' league table for Southeast Asia and Singapore, putting it well ahead of its peers.

In the past three years alone, PwC has completed 57 deals in Southeast Asia, including 26 deals in Singapore. This track records of successful deals show the trust that both global and regional clients place in the firm. In addition to Ling's roles and responsibilities as deal leader in Singapore, he now co-leads PwC's Korea-Singapore deal center with PwC Korea's Global Corporate Finance and M&A Advisory leader Steven Jeong. The center was officially launched in July this year, aiming to facilitate M&A and PE deals between Korea and the Southeast Asia region.

"The deal center allows for increased and more streamlined and direct cross-collaborations between Korea and Singapore to better service our clients," Ling said. "As we are seeing more opportunities that could be of interest to Korean investors, the deal center provides a platform for us to tap into the specific sector and market expertise of both teams to originate, source and execute deals for our clients."

Ling elaborates that PE deal values in Southeast Asia exceeded $25 billion in 2021 and the region's markets offer plenty of opportunities for large corporations in Korea and Korea-based PEs to invest into. As Singapore is the region's financial hub equipped with a stable regulatory framework, Korean investors can consult with the PwC deal center to access diverse investment opportunities in Southeast Asian countries.

"Korean investors would be able to find great opportunities investing in PE portfolios in Southeast Asia. PEs' role and function in the financial markets act as a screen to shortlist and navigate through this diverse market. Through investing in PE portfolios, investor would be able to find attractive companies with not only strong growth potentials, but also attractive growth sectors, capable management team, high compliance standard and strong IT and systems infrastructure," Ling highlighted.

Recently, PwC acted as a financial adviser to SK ecoplant's acquisition of TES-Envirocorp, a Singapore-based electronic waste management service provider. The SK affiliate purchased the entire stake from Navis Capital Partners, an Asia-based private equity firm. As TES-Envirocorp operates 43 facilities in 21 countries located globally, SK ecoplant's acquisition of TES accelerates SK ecoplant's entry into the space of recycling, repurposing and reusing of IT devices and EV batteries. Ling said by leveraging PwC's relationship with Navis Capital Partners, the Korean company was able to front-run the formal process.

PwC also advised on SK ecoplant's acquisition of Cenviro, an integrated environmental waste management service provider based in Malaysia. The deal leader added that by demonstrating the SK affiliate's significant strategic synergy and added value to Cenviro, SK ecoplant was able to emerge as the winning bidder of the transaction.

M&A and PE investment trends in Southeast Asia

Besides these mega-deals involving the Korean conglomerate, PwC is currently working on several sell-side mandates across the education, IT, industrials and logistics space.

What is particular to the region is that PE investors are leading the M&A trend there, according to Ling. PE investments, especially seeking a strategic minority to high-growth companies, are well-received by the business owners across the region. As Southeast Asian countries post robust annual growth, poised to be a significantly larger manufacturing hub, PE investors are especially eyeing these opportunities. Actually, PE deals comprise about 57 percent of M&A activities in Singapore over the past three years, and this trend is expected to continue in the whole region for the foreseeable future.

"We note a clear trend towards the regionalization of manufacturing firms in Southeast Asia and beyond. With growing geopolitical tensions, manufacturing firms are looking to shift its manufacturing capabilities from China to Southeast Asia and regionalize operations to lower operational risks, diversify supply bases as well as to minimize supply chain costs. This has driven M&As of manufacturing companies that can offer a 'China-plus-One' strategy to global players," the deal expert illustrated.

Ling explained that the fast-paced growth of digitalization and e-commerce in the region provide more investment opportunities in IT and logistics services.

"Similar to the rest of the world, digitalization is certainly a key trend in Southeast Asia's M&A and PE markets. The comparatively younger economy and population are receptive to the digitalization trend, which has made Southeast Asia one of the productive grounds for breeding tech unicorns. We expect that the tech, AI and process automation would see a significant growth in the near future in terms of M&As," Ling pointed out.

An increased emphasis on environmental, social and corporate governance (ESG) considerations is another pillar of Southeast Asian countries' recent investment trends.

"With increasing global warming awareness, we have also seen ESG at the top of the boardroom agenda, especially with larger firms. Integration of ESG considerations to key decision are being seen in order to both reap the potential benefits of ESG-positive assets as well as comply with increasing ESG disclosure standards that are being set across Southeast Asia and globally. This trend is expected to continue to grow aggressively and would provide opportunities for investors," he said.

Regarding concerns about sluggish global economic conditions and tightening monetary policies that are causing asset and equity price plunges, Ling expects the M&A and PE markets to remain solid, as they seek value-creation opportunities.

"PEs focus more on sound business strategies than on volatile equity prices. This is a value relatively unaffected and unrelated to the public equity market. There are market cycles, of course, but the fluctuation in the public market is less important for value investors," Ling stressed.

'Building trust is key'

As to the secret to his decades-long success in the financial advisory business, Ling emphasized that building trust is the key strength.

"We focus on building trust between us and our clients, trust between PwC team members and trust between PwC offices. The key success factor is being a trusted adviser to our clients. Trust takes time to establish, but one single incident can easily destroy trust and relationship. Over the years, we ensured to go above and beyond to continuously sustain and enhance this trust," Ling highlighted.

"Also, we work jointly across countries as one team. We are locally connected, however also globally operational. PwC offices share ideas and vision as one team through non-stop communication," he said, adding that PwC is a global organization with offices operating in 156 countries, which are all connected and work seamlessly as one team.

Lastly, he once again stressed the win-win benefits of joining hands between Korean investors and Southeast Asian businesses.

"Southeast Asian countries are an extremely diverse market with significant growth opportunities for sophisticated investors in developed markets such as Korea to tap upon. Despite obvious global uncertainties and risks that are present from the COVID-19 pandemic and geopolitical tensions, PwC is optimistic that Southeast Asia will continue to be an attractive market for PEs and large multinationals to achieve their strategic goals. The continued collaboration between Singapore and Korea will only be beneficial for both markets and we look forward to strengthening this relationship," Ling said.