Southeast Asia’s private equity market shatters records in deal value in 2017

KUCHING: Following another spectacular year for private equity across Southeast Asia, the region achieved a record year with US$ 20 billion in deal value for 2017, up from US$ 8 billion in 2016.

According to Bain & Company’s 2018 Southeast Asia Private Equity Report yesterday, this success was linked to a number of megadeals over US$ 1 billion each, a strong showing across various sub asset classes, and a positive impact from digital, which truly made its mark over the year.

“Without a doubt, this was an incredible year for PE investments in Southeast Asia,” said Suvir Varma, Bain & Company partner and leader of the firms Asia Pacific Private Equity practice.

“In particular, the growth in buy- out deals across markets is a sign of increasing sophistication on the part of both buyers and sellers.”

With an average deal size of US$ 284 million, up from US$ 130 million in 2016, last year’s phenomenal results benefitted from strong showings in the digital sector, with internet and tech gaining a large share of the deals.

Internet and tech deals continued to be favored investment segments accounting for 39 per cent of total deals in 2017, up from 34 per cent in 2016, suggesting they are both the clear winner in terms of number of deals, but also that they are rising in the minds of investors.

It was an exceptional year for all markets in the region, with Singapore as the stand out, driven by a number of deals worth more than US$5 billion. Bain & Company’s report also found sustained interest in VC and early stage deals, with strong involvement from strategic investors in growth and earlier rounds.

However, pricing remains tough, with deal multiples near all-time highs. Another key point from the report is the increased competition general partners (GPs) are facing from multiple directions.

According to Bain & Company’s 2018 Asia-Pacific survey of 136 senior PE practitioners, approximately 70 percent of respondents said they expect competition to increase moderately or significantly in 2018. The biggest threat for Asia-Pacific GPs is local or regional PE firms (63 per cent), followed by strategic or corporate players (47 per cent).

“With this solid momentum from 2017 behind us, one can expect SE Asia to remain at the forefront of investors’ minds as they look to invest in Asia,” said Varma.