Private equity investment in SE Asia booming but warning signs flicker
Private equity investment last year in both value and number of deals was well up on five-year averages, with investment in tech and internet firms representing two-thirds of deals
Southeast Asia private equity investment in technology and internet sectors is burgeoning but weaker exits is casting a shadow over the market, according to Bain & Company’s latest research.
Deal values reached new heights across Asia-Pacific, making 2018 another record-breaking year for private equity in the region.
The management consulting firm Bain & Company’s study on the Southeast Asia private equity venture capital sector showed the region experienced a solid year, with the overall deal value up 38% compared to the five-year average, reaching US$13 billion.
Meanwhile, the deal count increased to 76, up 18% versus the five-year average, though the exit value dropped 48% versus the five-year average, to US$5 billion, as did the exit count, dipping 52% to 16.
Although exit activity eased, investments into the tech and internet industries continued to grow, similar to the broader Asia-Pacific trend, and accounted for almost two thirds of deals by count.
Many funds in Southeast Asia are now seeing environmental, social and governance (ESG) as an important factor to consider, but few of them have built capabilities to embed ESG reviews into their investment processes.
ESG-specific composite is outperforming their counterparts, with this type of investing proven to give positive financial performance by around 60 percent.
“Southeast Asia’s PE and VC markets continue to be an area where smart investment can yield results. However, the changing environment means that they also need to be fast-moving and dynamic,” says Usman Akhtar, the lead in Bain's Southeast Asia private equity practice and co-author of the report.
“Playing the new economy opportunity smartly and getting ahead of ESG are two ways investors can be a step ahead of their competitors in this exciting market,” Akhtar adds.
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20 May 2019