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Sri Lanka to witness a rise in M&A Deals in 2019

Sri Lanka to witness a rise in M&A Deals in 2019

Sri Lanka is on its way to seeing a powerful mid-cap merger and acquisition (M&A) deal pipeline in the 3rd and 4th quarters of 2019. There are many interrelated explanations for the root cause. Mid-size businesses are experiencing flat organic growth after a lengthy period of elevated double-digit organic growth in 2019.
Thus, acquiring or merging is the only way these businesses can attain quantum development and economies of scales (demanded by increasing expenses). However, a straightforward consolidation exercise will not assist the integration process that needs to go through a radical method of rationalization – to reach the optimum company model and the expected effect of the bottom line.
The need for such mid-tier M&A agreements is also driven by single-owner/investor and family-owned businesses seeking to expand, corporatize and guarantee the sustainability of their investments beyond the present generation.
The present financial and trading climate in Sri Lanka has led several mid-sized enterprises (particularly one that relies strongly on trading) to search for similar line businesses, as a result of which many rationalize their business portfolio, operations and expenses. While deal pricing (on the sell side) may not be advantageous in such a setting, those with access to investment financing are driving and sometimes maneuvering their goals to the negotiating table.

OSL Take:

China remained a top foreign acquirer of Sri Lankan assets in 2018, as measured by transaction value, with over $1 billion investments to date. Hence, Sri Lankan companies remain popular hotspots; targets for multi-billion dollar Chinese businesses/investors who could explore business/investment opportunities in Sri Lanka with the increase in the M&A deals in later 2019.

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Article Code : VBS/AT/26082019/Z_T3

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