Acquisition Analysis: Remittance Industry in Singapore by Grab

This report provides an analysis of the remittance industry in Singapore, focusing on a potential acquisition target. It examines the industry's growth, market size, and the increasing competition. The analysis includes a financial evaluation of a specific company, considering transaction volumes, profit margins, and expenses. The report highlights the company's declining customer base, decreasing profits, and rising fixed expenses. It calculates a valuation price and considers non-financial factors such as infrastructure and service offerings. Assumptions related to salary, rent, and service charges are outlined, along with references to relevant industry data and sources. The report concludes with recommendations for the acquiring company, emphasizing the need to adapt its business model to the target company to achieve profitability.

Remittance
industry
ANALYSIS OF ACQUISITION BY GRAP

Remittance Industry In Singapore
 The remittance industry is an industry where, users are able to
make cross border payments.
 It is a new industry which creates competition for the banks and
other financial services industry.
 The industry provides services either through a desktop or
through mobile application.
 The remittance industry of Singapore has provided services of
around $503 million in the year 2019.
 The industry is expected to grow at the rate of 14% each year,
and by the end of 2023 the industry is expected to be $703
million dollars.

Analysis of Acquisition Target
 The target company is company which is doing remittance business
in Singapore.
 The company has reported profits which are in the green over the
years.
 The company has been losing its customer base due to increase in
the competition.
 The volume of transactions for the company is also decreasing over
the years along with the profits.
 The profit margin of the company is reducing as 1.078%, 1.013%
and 0.898% respectively.
 The transaction per customer has remained stable above 3 over the
years.

Analysis of Acquisition Target
 The average price of each transaction has been stable around
$515 to $524 over the analysis period.
 The profits of the company have been falling which is a cause of
concern.
 The fixed expense of the company is also increasing over the
years.
 The company has burden of interest expense as the interest
coverage ratio of the company is increasing.
 The valuation price of the company is calculated at $224736443.
 This is calculated by taking the average of the past 3 years
transaction and multiplying with each transaction average
volume and adding the outstanding liability.

Non Financial Points to be
Considered.
 The company lacks the infrastructure as the new companies
since it only has 10 employees to handle business affairs.
 The company provides transaction only through desktop, while
mobile application are being offered by competing companies.
 Thus the Grap company needs to apply their business model to
the target company and analyse the profitability it can generate.
 The profitability should be greater than the cost of the acquisition
company. Then only the company would be profitable.
 The company would need to create a customer base in
Singapore, since most of the transaction of the company are out
of Singapore.

Assumptions:
 The model has a series of assumptions which is used in the
valuation of the company.
 The salary, rent and the interest expense has been assumed for
the calculation.
 The growth rate of salary is taken as 5%, while the office rent is
10%.
 The service charge is taken as $4, while the bank charges is
taken as 1%.
 The assets of the company are considered to be negligible, while
the liability is considered to be significant.

References:
 "Grab Unveils Region’S First Wallet-To-Wallet Remittance Product | Grab SG".
2018. Grab SG. https://www.grab.com/sg/press/others/grab-unveils-regions-first-
wallet-to-wallet-remittance-product/.
 "Digital Remittances - Singapore | Statista Market Forecast". 2020. Statista.
https://www.statista.com/outlook/332/124/digital-remittances/singapore#marke
t-globalRevenue.
 Research, Ken. 2020. "Singapore International Remittance Market Is Anticipated
To Generate Transactions Valued Of Over SGD 11,000 Million In Outbound
Remittance Space By 2023, Primarily Owing To The Increased Growth Of Fintech
Startups & M-Wallet Companies: Ken Research". Prnewswire.Com.
https://www.prnewswire.com/in/news-releases/singapore-international-
remittance-market-is-anticipated-to-generate-transactions-valued-of-over-sgd-
11-000-million-in-outbound-remittance-space-by-2023-primarily-owing-to-the-
increased-growth-of-fintech-startups-amp-m-wallet-companies-ken--
889584178.html.