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Tuesday Nov 05, 2024
Tuesday, 29 March 2022 01:22 - - {{hitsCtrl.values.hits}}
From left: Director Deals Strategy Ruvini Fernando, Corporate Finance and Valuation Consulting Director Aruna Perera and M&A Associate Director Nishadee Weragala
Global mergers and acquisitions (M&A) hit new highs in 2021, breaking prior records with >62,000 deals announced globally, +24% year-on-year.
Demand for technology, digital and data-driven assets, and the pent-up-deal-making demand from 2020 drove M&A activity in 2021.
In Sri Lanka, deal activities (including M&A and private placements) rebounded in 2021, with 30 plus announced deals, +32% from 2020.
Disclosed deal value exceeded Rs. 33 billion, including three megadeals (deal value >Rs. 4 billion).
Energy and export-oriented businesses led M&A activity in 2021 whereas sectors hardest hit by COVID-19 continued to struggle.
According to Associate Director M&A Nishadee Weragala, the key themes that drove deals were divestitures of underperforming/non-core businesses as entities want leaner balance-sheets and agile business models to weather any potential storms; Government policies (clean energy, NBFI-sector consolidation, FX restrictions, building technology and logistics hubs and SME upliftment) and attractive valuations.
Founders and investors (PEs, family offices, HNIs, etc.) also capitalised on attractive valuations to realise their investments.
Development Finance Institutions invested a total of Rs. 25 billion into financial services and retail sectors through private placements, to support socio-economic growth and SME upliftment.
CSE saw 14 IPOs raising > Rs. 12 billion of equity capital in 2021, the highest ever since 2011.
Tax concessions offered in the National Budget 2021, and excess market liquidity from low-interest rates drove equity-market activity.
PwC’s predictions for deals in 2022
According to Director Deals Strategy Ruvini Fernando, over the past few years, operating cost savings, lower taxes, and low-interest rates helped many companies achieve year-on-year earnings growth whilst Covid-induced business reconfiguration spurred divestments and M&A.
However, currently, each of these pillars is facing pressure in Sri Lanka, from rising interest rates, inflation, devaluation, taxes, commodity prices, and tightening regulations.
This volatility will see a wide range of new business trends and opportunities emerging during 2022.
PwC notes the following factors are expected to drive deals in 2022: