M&A and Carve-Out Strategies in Southeast Asia: A Recovery Driven by Regional Companies

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This article is a summary of a YouTube video "M&A and Carve-Out strategy in Southeast Asia" by Deloitte Dbriefs AP
TLDR M&A and carve-out strategies in Southeast Asia have seen a recovery in activity, driven by companies in the region, with a focus on divesting better businesses for cash flow management and digital transformation, while tax implications and preparation are crucial factors for success.

M&A Trends in Southeast Asia

  • 🌍
    M&A and carve-out strategies are important considerations in Southeast Asia, highlighting the region's growing significance in the global business landscape.
  • 💰
    The value of M&A deals in Southeast Asia has increased substantially, driven by a 40 billion dollar deal between Grab and a spec in the US.
  • 🌍
    Southeast Asia has seen a significant increase in M&A activities, with Singapore, Indonesia, and Vietnam being the top countries involved.
  • 🌍
    Singapore, the US, and Japan are the top countries contributing to M&A activities in Southeast Asia, with China and Hong Kong also being major foreign investors in the region.
  • 🌍
    Business model transformation and digitalization are driving companies in Southeast Asia to sell off non-core assets and reinvest in areas that align with their core competencies.
  • 🌍
    The presentation emphasizes the importance of understanding the local market dynamics and cultural nuances when pursuing M&A and carve-out strategies in Southeast Asia.

Carve-Out Strategies in M&A

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    Pursuing a carve-out strategy can be driven by various reasons, including focusing resources on the core business, generating additional capital, and divesting underperforming businesses.
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    "If you are not well prepared, then you are technically preparing to fail." - Preparation is crucial in a carve-out strategy to ensure success.
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    Carve-out strategies in M&A transactions involve transferring the target business to a separate entity before selling it to the buyer group, while the retained business stays within the divesting group.
  • 💼
    When acquiring receivables, it is crucial for the buyer to assess the recoverability of the receivables before the acquisition, as any bad debt in the future will not be deductible for the buyer.
  • 📝
    The buyer will not inherit any historical tax risk of the seller, which can be beneficial in terms of avoiding potential tax liabilities.

Tax Considerations in M&A Transactions

  • 💰
    The absence of capital gains tax in Singapore makes it an attractive location for selling shares and conducting M&A deals.
  • 💼
    Purchase price allocation is crucial in determining the taxability of gains and the amount of capital allowance claim or distinctivity payable on real estate, highlighting the importance of accurately valuing assets such as intellectual property.
  • 💰
    When selling shares of an Indonesian entity, the tax rate is 5%, but if the company is listed on the Indonesian stock exchange, the tax rate is reduced to 0.1%, highlighting the potential tax benefits of being a listed entity.

Q&A

  • What is the focus of the video?

    — The video focuses on M&A and carve-out strategies in Southeast Asia, with an emphasis on tax implications.

  • How have M&A activities in Southeast Asia been affected by COVID-19?

    — Initially, M&A activities were affected by COVID-19, but they have since recovered, with a significant increase in deal value.

  • Which sectors have been dominant in terms of investment in Southeast Asia?

    — The transportation, hospitality, and service sectors have been the most dominant in terms of investment in Southeast Asia.

  • Which countries have been the top destinations for M&A activities in Southeast Asia?

    — Singapore, Indonesia, and Vietnam have been the top destinations for M&A activities in Southeast Asia.

  • What are the main reasons for pursuing a carve-out strategy in Southeast Asia?

    — The main reasons for pursuing a carve-out strategy in Southeast Asia include focusing resources on the core business, generating additional capital, and divesting underperforming businesses.

Timestamped Summary

  • 📊
    00:00
    M&A and carve-out strategy in Southeast Asia, including tax implications, were discussed in a video featuring speakers from Deloitte's offices in Singapore, Indonesia, Vietnam, Malaysia, and Thailand, highlighting the recovery of M&A activities in the region, driven by the Grab merger, despite uncertainties caused by COVID-19 and the Ukraine war.
  • 📈
    04:41
    M&A activities in Southeast Asia, driven by companies in the region, have focused on transportation, hospitality, and service sectors, attracting investment from Singapore, the US, Japan, China, and Hong Kong, with a goal of divesting better businesses for cash flow management and digital transformation.
  • 💡
    09:53
    Pursuing a carve-out in Southeast Asia can help businesses focus on their core operations, generate capital, divest underperforming units, or address regulatory concerns, with tax implications and preparation being crucial factors for success.
  • 💼
    15:12
    Carve-out strategies in M&A in Southeast Asia involve selling or transferring businesses to avoid complex tax and legal implications, with considerations for tax implications, purchase price allocation, and transferability of assets.
  • 💡
    26:53
    Transferring assets in Southeast Asia for M&A or carve-out strategies involves considering tax obligations, administrative requirements, and potential advantages for the buyer, while also assessing tax exposure and compliance with substance conditions.
  • 💼
    36:12
    M&A and carve-out strategies in Southeast Asia require approval from authorities, tax clearance, and adherence to business purpose conditions, with tax implications including corporate income tax, indirect taxes, and exemptions depending on the cut-out scheme, and considerations for accumulated tax losses, relieving returning tax, and legal procedures and regulatory considerations.
  • 💡
    46:38
    Carve-out strategies in Southeast Asia have tax implications, including the need to pass beneficial ownership tests for tax relief, the imposition of taxes on offshore share transfers, and the consideration of upcoming changes in international tax rules.
  • 📝
    56:29
    Equity shares not included in group income are excluded from computing the effective tax rate (ETR), while gains from the sale of assets are generally included in group income, potentially reducing the ETR and requiring a top-up tax if it drops below 15%.
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This article is a summary of a YouTube video "M&A and Carve-Out strategy in Southeast Asia" by Deloitte Dbriefs AP
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