Latest news with #MISC
New Straits Times
10 hours ago
- Business
- New Straits Times
The risks of corporate mergers and acquisitions
Bumi Armada Bhd and Petronas-linked MISC Bhd have mutually called off their proposed merger, ahead of the lapse of their memorandum of understanding on Aug 14. In a filing, MISC said its board was of the view that the proposed merger "would not fully achieve the intended strategic objectives" following evaluation and discussions. When announcing the proposal in November, the companies said the merger "will establish a Malaysian-based sector-focused entity which leverages the combined talent pool, project development and engineering capability, and know-how" of both firms Mergers and acquisitions Corporate mergers and acquisitions (M&A) are often portrayed as strategic moves that create synergies, improve efficiency, and enhance shareholder value. In theory, synergy implies that the combined value of two companies is greater than the sum of their parts. This can result from cost savings, increased market share, improved technology, or enhanced capabilities. However, in practice, M&As are not always synergistic. While some mergers do result in measurable benefits, many fail to deliver the promised value, and some even destroy it. The risks associated with M&A are numerous and complex, affecting financial performance, organisational culture, and strategic direction. Synergy: Myth or Reality? The idea of synergy is one of the primary justifications for M&A. There are generally two types of synergies companies aim for: cost synergies and revenue synergies. Cost synergies arise from eliminating redundancies, such as overlapping departments or operations, which leads to reduced expenses. Revenue synergies come from cross-selling products, expanding into new markets, or leveraging combined R&D. While these potential benefits are attractive, achieving them is far from guaranteed. Studies have shown that more than half of all M&A deals fail to deliver expected synergies. One of the main reasons is overestimation of benefits and underestimation of costs. Executives may become overly optimistic, miscalculating the challenges of integration or the real value of the target company. This leads to overpaying for the acquisition and realising too late that the expected gains are unattainable. Key Risks of Mergers and Acquisitions Cultural Misalignment One of the most underestimated risks in M&A is cultural incompatibility. Each company has its own set of values, communication styles, management practices, and workplace norms. When these differ significantly, integrating the two can be extremely difficult. A clash in corporate cultures can lead to employee dissatisfaction, increased turnover, and reduced productivity. For example, if a risk-taking startup is acquired by a conservative, bureaucratic corporation, innovation may stall, and key employees may leave. Integration Challenges The integration process involves aligning systems, processes, human resources, supply chains, and more. Failure to integrate effectively can lead to operational disruptions, delays, and customer dissatisfaction. Integration complexity increases with the size and geographic spread of the companies. IT systems, in particular, are often difficult to merge and can be a source of costly errors. Loss of Talent M&As can create uncertainty among employees, leading to fear of job losses, demotivation, or voluntary departures of key personnel. If critical leaders or innovators exit during or after the acquisition, the organisation can lose institutional knowledge and leadership, diminishing the long-term value of the deal. Regulatory and Legal Hurdles Mergers can attract the attention of regulatory bodies, especially in industries with limited competition. Antitrust investigations and approval processes can delay or even block a deal. Additionally, unforeseen legal liabilities from the target company, such as pending lawsuits or compliance issues, can negatively impact the acquirer post-merger. Financial Risk Many M&A deals are financed through debt. Over-leveraging can burden the newly combined entity with high interest payments and limited financial flexibility. If the anticipated revenue growth does not materialise, the company might struggle to meet its debt obligations, risking financial instability. Strategic Drift Companies often engage in acquisitions to pursue new strategic directions. However, if the acquisition does not align well with the company's core competencies, it may dilute focus and hinder overall performance. This is especially true when companies expand into unfamiliar industries or markets without adequate understanding. Market Reaction Investor sentiment can be unpredictable. If stakeholders perceive the acquisition as overpriced or strategically unsound, the acquiring company's stock price may fall. In some cases, the market reacts negatively even before synergies are evaluated, based purely on perception or scepticism. While mergers and acquisitions offer the potential for synergy and growth, they are not inherently beneficial or risk-free. The promise of synergy is often overhyped, while the risks—especially around cultural fit, integration, and financial strain—are downplayed. Successful M&A requires thorough due diligence, realistic assessments of value, and well-executed integration strategies. Companies that approach M&A with caution, transparency, and a clear strategic rationale are more likely to realise lasting benefits. However, without these, the likelihood of value destruction is high.
The Star
2 days ago
- Business
- The Star
MISC and Bumi Armada to follow own path
MBSB Research said the end of the process had left management of both companies to pursue respective growth opportunities while retaining strategic autonomy. PETALING JAYA: The mutual termination of merger negotiations between MISC Bhd and Bumi Armada Bhd is not viewed negatively by analysts despite uncertainty about the direction of the companies. MBSB Research said the end of the process had left management of both companies to pursue respective growth opportunities while retaining strategic autonomy. 'We noted that MISC will retain full control of its offshore business strategy and pursue its growth plans without the complexity of an all-share transaction. This spared the group from potential shareholder dilution and integration costs due to the large-scale merger. 'As for Bumi Armada, this change allows the group to continue its independency on top of its strong order book,' the research house stated in a report following the announcement on Monday. In separate filings with the stock exchange on Monday, both companies announced they had mutually agreed not to proceed with their proposed merger, as the memorandum of understanding – inked on Nov 14 last year – between the two groups is set to lapse next Thursday. The non-binding share-based transaction had aimed to combine MISC's offshore business with Bumi Armada to create a leading Malaysian-based floating production storage and offloading entity. The research house said the failed talks suggested that MISC might be missing a growth opportunity, while Bumi Armada might lose synergy and access to extensive resources for the combined fleets. 'Nevertheless, we are looking at the bright side of this termination. 'For both MISC and Bumi Armada, we believe the potential merger may not be aligning to each other's long-term strategic objectives and will now focus on their own growth opportunities,' MBSB Research added.
Focus Malaysia
2 days ago
- Business
- Focus Malaysia
No merger ahead: MISC to pursue offshore growth Solo, Bumi Armada stays independent
MISC Bhd (MISC) and Bumi Armada Bhd (BAB) had mutually agreed not to proceed with their proposed merger, as the memorandum of understanding (MoU) between the two groups are set to lapse on 14 August 2025. 'We noted that MISC will retain full control of its offshore business strategy and pursue its growth plans without the complexity of an all-share transaction,' said MBSB Research. This spared the group from potential shareholder dilution and integration costs due to the large-scale merger. As for BAB, this change allows the group to continue its independency on top of its strong order book. While the termination of talks provides clarity, uncertainties remain on the direction of these companies. We expect that there could be some short-term market speculation upon reassessing the long-term growth for MISC and BAB in their FPSOs business without the merger. MISC may be missing a growth opportunity, while BAB might lose synergy and access to extensive resources for their fleet. External risks should still be considered, including: (i) Oil prices volatility, (ii) Supply chain issues, (iii) Geopolitical risks, (iv) Operational risks, (v) advancing technologies. We believe that, while the groups are likely to mitigate such challenges in accordance to their own business models and strategies, these risks will be crucial factors in determining the companies' trajectories moving forward. Nevertheless, we are looking into the bright side on this termination. For both MISC and BAB, we believe the potential merger may not be aligning to each other's long-term strategic objectives and will now focus on their own growth opportunities. Market may speculate on the future of these companies' fleet management, but we believe that MISC will continue to leverage on its tanker fleet and pursue sustainability solutions for its ships, while BAB will remain vigilant for other growth opportunities for its FPSOs and offshore E&P projects. Pending further updates on this termination as well as the upcoming earnings results, we maintain our BUY call for both MISC and BAB with maintained target prices of RM8.13 and RM0.70 respectively. —Aug 5, 2025 Main image: Wong Engineering Corporation
New Straits Times
2 days ago
- Business
- New Straits Times
MARKET PULSE AM AUG 5, 2025 [WATCH]
KUALA LUMPUR: News on the latest moves on the stock and crypto markets. Bursa Malaysia opened higher on Tuesday, taking cues from Wall Street as investors grew optimistic that the Federal Reserve might lower interest rates next month. The benchmark index is expected to receive some buying support and is likely to trade within the range of 1,525 to 1,535 points today. Bumi Armada was among the top gainers in early trading, opening 1.2pct higher at 42 sen. The company and MISC have mutually ended their proposed merger, first announced in November 2024, after MISC said it would not fully meet strategic goals. In the cryptocurrency market, Bitcoin is trading lower at around RM487,068, while Ethereum is trading at approximately RM15,649. That's it for Market Pulse.
New Straits Times
3 days ago
- Business
- New Straits Times
MISC, Bumi Armada cancel their merger deal
KUALA LUMPUR: MISC Bhd and Bumi Armada Bhd have mutually ended their proposed merger. The merger proposal, first announced in November 2024, was envisioned as an all-share transaction to combine the companies' floating production, storage and offloading (FPSO) fleets. The goal was to establish a Malaysian-based entity with the scale and resources to compete in the growing and capital-intensive offshore floating production segment. The non-binding memorandum of understanding will lapse on Aug 14, in accordance with its terms. In a filing with Bursa Malaysia, MISC said the proposed merger would not fully achieve the intended strategic objectives following evaluation and discussions. "The company will continue with its other growth plans," MISC added.
