Overview of Acquisition Financing in Singapore

2024 was a favourable year for mergers and acquisitions (M&A) with a marked increase in deal value in Singapore of 41.1% year-on-year from 2023 reaching a total of USD82 billion, with 16 M&A deals in Singapore each exceeding USD1 billion in deal value in 2024. A significant M&A deal financed by debt was the purchase of Vietnam’s biggest private healthcare group, FV Hospital, by Singapore-listed Thomson Medical Group for about USD381.4million. This was the largest healthcare acquisition in South-East Asia since 2020. The generally positive M&A climate has given rise to cautious optimism in the acquisition financing space heading into the first quarter of 2025.

The easing of inflation in Asia and existing interest rate cuts by most central banks in the region in 2024 have lowered borrowing costs down from the highs of 2022 and 2023, bolstering the optimistic outlook for acquisition financing activity in the year ahead. Based on the latest EY-Parthenon CEO Outlook Survey: Global Confidence Index, 85% of Asia-Pacific CEOs who participated in the survey felt that the global market outlook was promising with over 60% looking to engage in M&A, compared to less than 40% in the last quarter of 2024. That said, this optimism may be tempered by the uncertainty surrounding tariffs announced by the Trump administration from 2 April 2025 and reciprocal tariffs imposed by the US’s trading partners, which may impact Singapore as a trading hub notwithstanding the temporary pause announced by the US for most such tariffs.

Recent trends and developments in the Singapore acquisition financing space include a rise in leveraged buyout lending, an uptick in acquisition financing activity in the healthcare sector, changes to the Enterprise Financing Scheme (EFS) – Mergers & Acquisitions, and the movement towards alignment of taxonomies in the environment, social and governance (ESG) space. Also worth considering is the increase in vendor financing seen in other jurisdictions, and whether this will catch on in Singapore. These trends and developments are discussed in more detail below.

Private Equity and Private Credit: Leveraged Buyouts

Notwithstanding the aforementioned tariff-driven uncertainty, leveraged buyouts may yet gain further traction globally in 2025. Borrower-friendly market conditions in 2024, which included improving valuations, easing interest rates and lowered inflation, have encouraged investment banks and private credit lenders to increase their involvement in sponsor financings in the leveraged buyout space, following significant write-downs on high-risk M&A loans in the preceding years.

On a global level, private debt funds have financed a record proportion of private equity-backed leveraged buyouts in over a decade, financing 77% of leveraged buyouts compared to 23% by traditional banks in 2024. Private debt is poised to maintain its dominance in the leveraged buyout market in 2025, with private debt funds financing 83% of the 53 leveraged buyout deals announced in the first three weeks of the year.

There has also been a widespread resurgence of leveraged buyout lending activity across Asia in the first quarter of 2025, one example being the ongoing discussions by Advent International, an American-based global private equity firm, for a USD300 million leveraged buyout loan to finance its acquisition of the mainland China business operations of Ginko International, a Taiwan-based manufacturer of contact lenses.

Acquisition Financing in the Healthcare Sector

A growing demand for healthcare services in the shadow of an ageing population has seen the healthcare sector in South-East Asia experience a surge in M&A activity, with an M&A deal value of USD1.13 billion being recorded in the region between January and April 2024. In the second half of 2024, other notable deals were put to bed such as the acquisition of Malaysia’s Island Hospital by IHH Healthcare for USD901 million.

Healthcare sector players in Singapore have also been active, with Thomson Medical Group taking up acquisition financing to acquire Vietnam’s biggest private healthcare group, FV Hospital for approximately USD381.4 million, and HMI Medical acquiring a majority interest in Advances Urology Associates, the largest private urology specialist group in Singapore. Other significant healthcare M&A deals in Singapore in the last few years include the acquisition of private clinic groups OncoCare Medical and Novena Heart Centre by Templewater, a Hong Kong-based private equity firm, as well as an investment by Temasek-backed 65 Equity Partners for a 18.3% stake in Tamarind Health as part of a deal for the latter to acquire local cancer specialist TalkMed Group.

Private credit lenders and private equity firms have also played prominent roles in the healthcare M&A space in South-East Asia. CVC Capital Partners acquired Siloam International Hospitals, Indonesia’s largest private hospital operator, for approximately USD1.1 billion and, alongside other global private equity firms such as Warburg Pincus and TPG, is among the group of bidders seeking to acquire a stake in Metro Pacific Hospital Holdings, the largest private hospital operator in the Philippines. Deutsche Bank’s private-credit arm, DB Investment Partners, is also reported to be currently building up its private-credit business in Asia and is looking to pursue opportunities in the region, including in the healthcare sector. 

The level of deal activity in this sector may point toward a promising year ahead for acquisition financings in Singapore’s healthcare sector, though contingent upon prevailing market conditions, with potentially more of such acquisitions being financed by private credit as the private credit market continues to grow in the Asia-Pacific.

Taxonomy Alignment and Acquisition Financing

Sustainability has become a significant consideration in many M&A deals. There is an increasing focus on compliance with ESG standards and the management of environmental issues throughout the M&A life cycle, from the initial due diligence phase through to post-completion. ESG red flags, or concerns about a target company’s ESG performance, can be a key reason for acquisition deals being put on hold or falling through. A survey conducted by Deloitte in 2024 of leaders at corporations with revenues of at least USD500 million or private equity funds of at least USD1 billion in assets under management showed that 72% of respondents have decided not to proceed with acquisitions because of ESG red flags, up from 49% of the respondents in 2022. 

Such considerations play a crucial role in shaping the broader financial landscape. As companies and investors become more attuned to ESG factors, financial markets correspondingly evolve to take this into account. In particular, we are seeing a greater alignment of ESG taxonomies with one another. ESG taxonomies are criteria that provide financial institutions with guidance on identifying and classifying activities as green or transitioning towards green.

In 2024, the mapping of the Singapore-Asia Taxonomy to the International Platform for Sustainable Finance’s Common Ground Taxonomy was completed. The new Multi-Jurisdiction Common Ground Taxonomy (M-CGT) seeks to enhance the interoperability of the Singapore Taxonomy alongside the EU Taxonomy and People’s Bank of China’s Green Bond Endorsed Project Catalogue. Furthermore, Version 4 of the ASEAN Taxonomy for Sustainable Finance is also in the works. Classifications for sectors such as agriculture and manufacturing are set to be refined, and the ASEAN Taxonomy will be further expanded to cover two more sectors – information and communication, as well as professional, scientific and technical activities.

Historically, cross-border flows of green capital and financing have been stymied due to the lack of taxonomy alignment and varying ESG standards across different markets. These developments may now serve as a common reference point for green and transition activities, facilitating collective investments and financings in the jurisdictions covered. Having clear and standardised references for green activities also reduces the risk of greenwashing which is, in turn, key to improving investor confidence. 

Consequently, we anticipate that this will likely have a positive impact on acquisition financings, with purchasers potentially having greater access to cross-border green and sustainability-linked bonds and loans, albeit facing a more rigorous application of ESG standards in taking up such financing.

Enterprise Financing Scheme, M&A Loans – Extension and Enhancement

While there tends to be a fair measure of focus on high-value M&A deals, the impact of the EFS on acquisition financing in the SME sector should not be underestimated. The EFS – Mergers & Acquisitions scheme (the “EFS M&A Scheme”), which was launched in October 2019, is designed to encourage lenders to advance loans to eligible borrowers for domestic or international M&A activities through the 50% risk share by Enterprise Singapore subject to an overall borrower group limit of SGD50 million. In the case of enterprises operating in a challenged market (defined as countries with Standard & Poor ratings of BB+ and below, including non-rated countries) and young enterprises (defined as firms formed within the past five years with at least one employee and more than 50% equity owned by individuals), Enterprise Singapore’s risk share can increase to up to 70%.

It was announced in Budget 2025 that not only will the EFS M&A Scheme be extended to 31 December 2030 to continue supporting growth of SMEs, the potential loans under the EFS M&A Scheme will also be extended to cover target asset acquisitions, in addition to equity acquisitions, from 1 April 2025 to 31 March 2030. With more financing options available, SMEs may be able to pursue a broader range of strategic growth opportunities and manage risks by acquiring assets without being overly exposed financially, enhancing their ability to compete in both domestic and international markets, a development likely to be well received by SMEs looking to enter into acquisitions this year and beyond.

Vendor Financing

Vendor financing, an alternative structure in which the seller of the target company agrees to provide a portion of the acquisition financing to the buyer (including by deferring receipt of a portion of the purchase price), has been building momentum in the USA and Europe.

One of the ways that vendor financing has been structured is by way of an interest-bearing note issued by the buyer in favour of the seller. Alternatively, deferred payment provisions may be included in the sale and purchase agreement through a payment schedule, with amounts that often include imputed interest.

In terms of security, the seller may also offer share escrows, where the seller retains control of the shares of the company being purchased and remains in the position to reclaim control of the company if the buyer is unable to honour its repayment obligations.

The attraction of vendor financing lies in the upside to both buyers and sellers in the structure. For buyers, vendor financing serves as an alternative means of funding where traditional bank loans or other lines of financing might be unavailable or prohibitively costly. In turn, this increases the accessibility of the deal and widens the pool of prospective buyers. For sellers, they may be able to secure higher sale prices and expedite deal closures, as sellers can extend more flexible and favourable financing terms to appeal to a greater number of potential buyers, including those who might face issues securing traditional lines of financing.

While vendor financing has yet to catch on in the Singapore acquisition financing market, where acquisitions still tend to be financed using purchaser’s war chests or proceeds from acquisition financing loans from banks or private credit firms, it will be interesting to see whether this trend will surface in Singapore in the near future.

Conclusion

In 2024, South-East Asia experienced an increase in deal activity spanning various sectors, with Singapore being the frontrunner in terms of both deal value and volume. This uptick has fuelled optimism for the rest of 2025, though there remains a need to be mindful of the ongoing global geopolitical volatility.

Several significant areas warrant close attention in 2025. These include, potentially, increased activity in the leveraged buyout space as well as more acquisition financing in the healthcare sector driven by private equity investments (with opportunities for private credit players to step in). While there are early signs that the economic impact of the recently announced tariffs may reduce borrowing appetite and nudge banks to cut back on riskier loan commitments, the increased financial support for SMEs under the EFS M&A Scheme is expected to continue to support acquisition financing activity in the SME space in 2025.

Where ESG considerations factor in acquisition loans, the aligned taxonomies will improve access to sustainable financing and ensure the consistency and rigour of standards being applied across different markets. That said, with the withdrawal by the United States from the Paris Agreement and the dilution and repeal of several US environmental regulations, it remains to be seen if stakeholders may well approach ESG with enhanced caution and discretion as the world at large navigates a fragmented landscape.