The merger and acquisition (M&A) fever is heating up across Southeast Asia in the new year, with the latest case taking place in Singapore where listed broking house Kim Eng Holdings will be taken over by Malaysia's Maybank at the total cost of 1.79 billion Singapore dollars (1.38 billion U.S. dollars).

This deal comes not longer after Singapore Exchange has proposed an eye-popping 10.7 billion Singapore dollars (8.26 billion U.S. dollars) takeover of Australia Stock Exchange late last year. In the last 12 months, there have been 86 finance and brokerage acquisitions in Asia.

This fever is not confined to financial sector. Earlier, there were Parkway Holdings and Thomson Medical Center, which were two healthcare companies listed in Singapore, been acquired by Malaysia's Khazanah for 3.5 billion Singapore dollars (2.70 billion U.S. dollars) and a Singaporean investor for 513 million Singapore dollars (396 million U.S. dollars) respectively.

The improvements in Asian economies and stock market sentiment certainly embolden more and more companies in the region to go on shopping spree for acquisition targets. As Choe Tse Wei, managing director of M&As, capital markets at DBS Bank, has said: "Asian companies are showing great confidence in acquiring and integrating overseas acquisitions of meaningful size."

With so much easy money going around in the backdrop of still low interest-rate environment in most part of Southeast Asia, the current flurry of merge and acquisition activities is unlikely to recede very soon, even despite the higher price tags as the stock markets recover.

Lim Jit Soon, head of equity research in Southeast Asia for Nomura Singapore Limited explained: "We are likely to see increased M&A activity as ASEAN companies see acquisition opportunities within Southeast Asia. As ASEAN pursues greater integration with reduced trade and investment barriers, we believe there is significant potential for companies within ASEAN to increase their investments across ASEAN."

Nevertheless, investors would still have to be vigilant about the multitude of external and internal factors that could disrupt the current M&A mania.

Regulatory hurdles may be one of important external factors that companies may have to grapple with in their searches of takeover targets. Cross-border investment activities are often closely scrutinized by regulators, particularly in deals concerning strategic industries.

Take the recent takeover tussle for Malaysia's highways operator Plus Expressways Bhd between the UEM Group Bhd-Employee Provident Fund (EPF) and Jelas Ulung Sdn Bhd for example. While Jelas Ulung's 26 billion Malaysian Ringitt (8.47 billion U.S. dollars) takeover bid is higher than 23 billion Malaysian Ringitt (7.49 billion U.S. dollars) offered by UEM-EPF, Jelas Ulung's offer has turned controversial in the country when it is found that the funding for the acquisition has been arranged by a subsidiary of a foreign bank. With public outcry over foreign involvement in funding of Jelas Ulung's offer, Jelas Ulung's takeover bid is now hung in balance.

As for internal factors, it has more to do with the shareholding structure of many businesses, where controlling shareholders want to maintain control in their companies. Like their counterparts in other parts of Asia, many Southeast Asian companies are tightly held which has made any takeover attempt from outside very difficult.

Still, many analysts are optimistic that companies in the region are undeterred by these takeover hurdles. As Citigroup Equity Research team has noted in its Asia Pacific strategy report for the new year, "most of Asian corporates have improved their balance sheets and are actively looking for M&A opportunities to speed up industry consolidation as well as vertical or horizontal integration."

People's Daily