SINGAPORE Trends and Developments Contributed by: Christy Lim, Susan Wong, Felix Lee and Clarence Kang, WongPartnership LLP
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. Alter- natively, 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 struc- ture. 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 wid- ens 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 pur- chaser’s war chests or proceeds from acquisi- tion 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 sec- tors, 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 ongo- ing 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 econom- ic 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 acquisi- tion 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 land- scape.
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