The Sundaytimes Sri Lanka

Mergers and acquisitions on the rise; IPO takes a back-seat


Firms are increasingly facing Mergers and Acquisitions (M&A) under the tough economic conditions with owners of more than 10 firms selling them and opting out of business, while most companies are shelving their Initial Public Offerings (IPO), analysts say.

“NDB Investment Banking Division recently facilitated a decent sized M&A while about 10 firms sold out to bigger firms during the past year,” an official from NDB Capital Holdings told the Business Times on the sidelines of the re-launch of Capital Development and Investment Company PLC under a new corporate identity whilst being renamed as NDB Capital Holdings PLC. He said that during the last six months, they facilitated about four M&A – all of which are firms that are unlisted. “We hope to focus more on M&A in listed companies as well in this market,” he added.

Vajira Kulatilaka, company CEO and Director, noted that most firms have shelved their IPO due to the global crisis. The official said that about seven IPOs have been stopped temporarily. “All these were worth some Rs. 400 million,” he added. Ashok Pathirage, Deputy Chairman NDB commented that the Sri Lankan economy has bounced back strongly in the aftermath of the three-decades-long war and that this has created ample opportunities for the private sector whilst the government has initiated a massive infrastructure development plan which includes the development of roads, highways, sea and air ports and power.

He further added that, “We also have in place an investor friendly legal and regulatory framework and our financial reporting standards are on par with global standards. With this, Sri Lanka is expected to be elevated as a regional hub in the service sector offering Shipping, Aviation, Tourism and Financial Services located between Dubai and Singapore, exploiting its unique geographical advantage”. NDB Group CEO, Russell de Mel said that the private sector is expected to play a vital role in the development process and that the corporate sector would need huge capital investments that cannot be financed by traditional forms of bank borrowings.

“Such projects would require different types/sources of funding and the capital markets would play a vital role in channeling financing for the corporate sector”. He further elaborated that there would be an enhanced level of activity in the areas of mergers and acquisitions and financial restructuring. “Sri Lankan entrepreneurs would be seeking joint ventures with regional and global players and risk management and mitigation products as the scale and complexity of businesses grow giving ample opportunities for credible investment banking service providers.”

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