As founders retire, some SMEs go for M&As while others chart new path

Buyout allows the founders to cash out; others hand the reins to successors

- Chor Khieng Yuit

Increasing numbers of smaller firms in Singapore are exploring buyouts or mergers as their founders near retirement age and seek ways to put their companies on a viable footing for the future.

There were 343 mergers and acquisitions (M&As) involving small and medium-sized enterprises (SMEs) in 2023, up 55 per cent from the 222 in 2022.

The trend continued in 2024 with 242 corporate marriage deals as at Nov 30, noted Experian, which studied data from the Accounting and Corporate Regulatory Authority (Acra).

The data captured only those SMEs - enterprises with annual revenue under $100 million - that filed financial returns with Acra.

Mr Kenneth Leong, a partner at RPC Premier Law, said the companies looking for M&As are traditional businesses that dominated their industry in the 1970s and 1980s.

Many are original equipment manufacturers that make components for other companies' products and have built up their businesses by riding on Singapore's growth as a manufacturing hub.

The founders are now in their 60s or 70s, Mr Leong said, and a buyout allows them to cash out if they have no successors.

Mr Daniel Lee, senior consultant at Nihon M&A Centre Singapore, added that many of these owners started out as engineers or tradesmen, or with other humble backgrounds, building up their businesses in the process.

Their next generation may not share their aspirations, he said, adding: "Not everybody wants to take over the family business."

Nihon M&A Centre Singapore matchmakes local SMEs with Japanese enterprises that want to venture into South-east Asia.

It has brokered more than 15 deals here since 2016, each valued at between $10 million and $50 million, for companies in the construction, information technology and distribution industries, among others.