M&A: It’s a buyers’ market
View(s):The dynamic of opportunistic buyers and eager sellers is creating an attractive space for mergers and acquisitions (M&A) in Sri Lanka.
It is a buyers’ market, an investment banker said pointing out that witnessing the realities of the coronavirus pandemic, sellers are willing to quickly cut costs and sell their companies/ownership. “Now hotels have more palatable valuations,” a stock market analyst in the hotel sector told the Business Times.
Interestingly, many hotels are up for sale and certain companies are bullish in this sector to grow in the wake of an expected influx of Chinese tourists to the country. People in China have been given Sinopharm and Sinovac vaccines and are likely to be barred entry from the Western countries for the near future, a move Sri Lanka is relying on to revive its international tourism, a tourism industry analyst noted.
Western countries have relied on vaccines made in the US and Europe, such as Pfizer-BioNTech and AstraZeneca while many developing countries have used the Chinese-made shots, effectively polarising international travel for Chinese and nationals from these countries. China has so far immunised 243 million people and Sri Lanka will be winning if they can attract at least 2 per cent of this population as their preferred destination, the analyst added.
“This is one of the reasons that small hotels along the coast are being looked at by large companies in order to consolidate and grow,” he said. Already a few have been sold, according to him. “For large companies ready to turn crisis into opportunity, buying hotels is an important counter-intuitive growth strategy.”
Now there are opportunistic buyers and eager sellers, another industry analyst agreed noting that experienced buyers are literally leaping at openings, fueling mergers and mostly acquisition activity among these two parties.