The Southeast Asian technology boom is fueling record mergers and acquisitions

Hiring the technology sector in Southeast Asia reached $ 19 billion during the first six months of 2021, the strongest it has started in a year, driven by acquisitions by major Grab, Gojek and Sea groups.

Mergers and acquisitions increased 114% compared to 2020, according to Dealogic data, which reflects investor enthusiasm for one of the fastest-growing internet markets in the world.

Some 400 million Internet users live in Southeast Asia and the digital economy is expected to reach $ 300 billion by 2025, according to a report last year by Google, Temasek, the company Singapore State Investments and Bain Consulting.

If the announced offers are completed by the end of the year, inclusive Grab fusion with a special-purpose acquisition company, which will value the launch with SoftBank support at $ 40 billion: volumes would reach $ 75 billion, well above the 17 billion recorded in 2020 and 23 billion in 2019 .

Harry Naysmith, head of investment banking for Southeast Asia at Goldman Sachs, said the region’s technology economy has “accelerated in 5 to 10 years,” triggering large-scale liquidity events such as initial public offerings.

One of the biggest deals was between Gojek and Tokopedia, Indonesian technology groups, to create a technology platform worth more than $ 18 billion, the largest merger in the sector. But even excluding this deal and Grab’s Spac, making deals in 2021 is still on track to set a full year record.

Digital banking and lending were the main sectors that generated interest, said Varun Mittal, a Singapore-based partner and fintech technology specialist at EY, the professional services firm.

These include the acquisition by sea, the gaming and e-commerce platform, from Indonesian bank Kesejahteraan Ekonomi in January. The size of the deal was not disclosed.

“We’re seeing fintech technology companies acquire headlines to access regulatory licenses and get a scale at a fast pace,” Mittal said. “Southeast Asia will have 10 to 15 new digital banks in Singapore, Malaysia, the Philippines and Indonesia over the next three years, making this sector one of the critical investment destinations.”

The telecommunications sector has also been popular as companies consolidate to create scale and improve return on investment in 5G mobile networks, said Rohit Chatterji, co-director of Asia-Pacific mergers and acquisitions at JPMorgan.

Celcom Axiata and Digi.com, Malaysia-based companies, have completed a merger this month to create the country’s largest telecommunications group.

Chatterji said companies were also looking to monetize telecommunications towers, including plans to “unlock capital from infrastructure that can be rented and shared.”

Indosat Ooredoo, an Indonesian-based telecommunications company, sold its mobile tower portfolio for $ 750 million in March to Digital Colony, a U.S.-based infrastructure company.

The big test for investors will be whether companies can go public. Bukalapak, the Indonesian e-commerce company, will launch its IPO in Jakarta next month. GoTo, the name of the merged entity Gojek and Tokopedia, and Grab will be set for the list later this year.

“If short-term capital market events go according to plan, we should start a real virtuous cycle,” Naysmith said. “More investors will be comfortable with the TMT of Southeast Asia [technology, media and telecom] the capacity of the sector to provide returns “.