Trump's reciprocal tariffs have dealt a heavy blow to the prospects for regional mergers and acquisitions

Source: Lianhe Zaobao
Article Date: 09 Apr 2025
Author: Hu Yuanwen

Regional M&A activity is expected to encounter difficulties in the near term.

This article was first published on 6 April 2025 in the Singapore Mandarin broadsheet, Lianhe Zaobao.

SLW obtained permission to reproduce the article to give the legal community a broader view of legal reports for various news syndicates.

After a buoyant year for regional M&A activity, market optimism about entering the peak season has been dampened by US President Donald Trump’s imposition of tariffs. As a result, regional M&A activity is now expected to encounter difficulties in the near term.

Regional M&A transactions have been active over the past year. Just as the market was growing optimistic about the sector entering its peak season, US President Donald Trump's tariffs struck, and regional M&A activity is now expected to face short-term headwinds.

M&A professionals interviewed by Lianhe Zaobao pointed out that the global financial markets are in turmoil and the outlook for the year ahead remains uncertain. Some industry players believe that the investment and M&A climate in Singapore and Southeast Asia will be challenging. Following the announcement of the United States’ reciprocal tariffs, sentiment among some market participants has shifted from optimism to caution.

Some insiders also believe that companies may begin to re-evaluate M&A initiatives driven by shorter-term considerations.

In an interview with Lianhe Zaobao following a panel discussion organised by the Singapore Academy of Law at the Asia-Pacific Law Conference, Sandy Foo, Head of the Mergers and Acquisitions practice at Rajah & Tann, noted that the M&A market had performed better earlier this year compared to last. However, the market has since been thrown into turmoil due to the imposition of tariffs, and most people are now adopting a wait-and-see approach.

She noted that the outlook is difficult to predict and observed that market sentiment points to anticipated challenges for investment and M&A activity in Singapore and Southeast Asia.

The reciprocal tariffs announced by President Trump on Wednesday (2 April) significantly exceeded market expectations, with Vietnam being hit with a steep rate of 46%, Thailand and Malaysia facing tariffs of 36% and 24% respectively, and Singapore facing a benchmark rate of 10%.

Expert: M&A Deals Aimed at Short-Term Gains Should Be Postponed

In an interview with Lianhe Zaobao, DBS Bank's Managing Director of Corporate and Institutional Banking Strategy Advisory, Cao Zewei, said that client companies with extensive manufacturing operations across Asia are expected to be significantly affected by the new tariffs. These companies, along with their customers and supply chain partners, are currently assessing the impact of these changes. According to him, their response will depend on a range of factors, including the elasticity of consumer demand for each product in each market.

Mah Kah Loon, Senior Adviser at EY Strategy and Transactions, told Lianhe Zaobao, “If the purpose of a merger or acquisition is to yield results in the short term, then it should be postponed and not pursued at this stage.” However, if the M&A strategy is based on a horizon of at least five years, the acquiring company can afford to ignore short-term market noise and instead focus on the strategic rationale for the investment.

A senior M&A executive added that tariffs will inevitably impact the earnings outlook for some companies, which in turn will alter valuations and buyer bids, widening the gap between buyer and seller expectations. As a result, he expects M&A activity to slow in the near term.

Wong Wai Hong, Senior Partner at Dentons Rodyk, echoed this sentiment, noting that some participants may adopt a "wait-and-see" approach in the face of ongoing geopolitical uncertainty. “Dealmakers are becoming more cautious and are weighing all options before proceeding with a transaction. This is particularly crucial for industries that depend on global supply chains or logistics, as tariffs and shifting trade policies can have significant consequences.”

According to a Bloomberg report, last Friday (4 April), French building materials manufacturer Saint-Gobain decided to suspend the sale of its automotive glass business, a deal that could have been worth €2.5 billion (approximately S$3.681 billion). In another development, private equity firm KKR exited a consortium that had been in discussions to acquire Gerresheimer, a German producer of pharmaceutical and cosmetics packaging with a market capitalisation of around €2 billion (about S$2.945 billion).

Market watchers noted that tariffs vary between countries, and the impact differs accordingly. Each market also has a different degree of reliance on manufacturing. While the manufacturing sector is directly affected by tariffs, the services sector and intangible goods such as music are generally exempt. Furthermore, the proportion of each country’s exports to the US relative to its overall economy also varies, prompting companies to make market-specific adjustments.

Food Sector M&A Activity Continues to Meet Domestic Demand

M&A activity in the food sector remains active, with many projects currently in the market. Chua Koh-Peng, Managing Director of Proterra Investment Partners Asia, a firm that primarily invests in the regional food industry, explained that this is largely because food-related deals are often driven by domestic demand.

Despite the United States’ imposition of steep tariffs on several Southeast Asian countries, Wu Geng, Director of the Corporate and Finance Department at Drew & Napier, observed that the long-term growth trajectory of the Southeast Asian market remains evident. He added that, with Singapore facing a relatively modest 10 percent tariff, it is still expected to attract M&A investment.