Value of region’s private equity deals reach $25B

THE private equity market deal value in Southeast Asia more than doubled to $25 billion in 2021, signaling strong investment growth in the region, according to consulting firm Bain & Co.

“The previous year had seen a significant slowdown, with the market recording the largest fall across all Asia-Pacific (APAC) region markets due to travel restrictions hampering deal-making and diligence processes, but the progressive ‘opening-up’ of countries in the second half of 2021 helped drive a rebound in deal value,” Bain & Co. said in a statement on Tuesday.

In its 2022 annual Southeast Asia Private Equity report, it placed the 2020 comparative figure at $10 billion.

Usman Akhtar, Bain & Co. partner and head of Southeast Asia private equity practice, said that the region as a whole in 2021.

“Southeast Asia as a region has bounced back strongly from the COVID-19 (coronavirus disease 2019) impacted year in 2020, with the 2021 activity level showing that investors were keen to make up for lost time,” Mr. Akhtar said.

“While private equity (PE) investors continue to believe they can get strong returns in the region over the next 3-5 years, we also see them putting more emphasis on topline growth and operational improvements as expectations of multiple expansion become relatively muted,” he added.

According to Bain & Co., the APAC consists of over a quarter of the global PE market in 2021 following the increased deal volume in the Southeast Asia region.

It added that growth and early-stage investments surged in 2021, while growth deals remained the dominant deal type and contributed 77% of Southeast Asia’s deal value.

“Five megadeals accounted for 33% of total deal value, which grew 143% compared with 2020. The influx of capital from e-commerce, logistics and technology deals meant that Singapore, Indonesia and Vietnam saw a strong jump in their share of deal value and count, with further potential to climb moving forward, given the presence of sought-after tech companies and vibrant startup economy in these markets,” Bain & Co. said.

“Exit value in Southeast Asia more than doubled what it was in 2020, though it still is not at full potential [as] it remains below the average from 2016-2020. Much of the growth was driven by Singapore, particularly as maturing tech companies such as Grab debuted in the public markets,” it added.

Bain & Co. said the internet and technology sectors continued to contribute the lion’s share of deal volume and value across the Asia-Pacific PE landscape.

However, it mentioned that healthcare and financial services are starting to get bigger shares as investment targets after contributing 18% and 9% of overall deal count, respectively.

“Investors globally and especially in Southeast Asia are rightly concerned about finding the right opportunities to invest in amid the increased competition from global and local funds,” said Suvir Varma, senior advisor to Bain & Co. global private equity practice. 

“Given the competitive intensity, funds would do well to have defined themes around which they wish to deploy capital, a clear investment thesis for each asset, and a prepared action plan to intervene should the macro conditions turn against them,” he added.

Meanwhile, Bain & Co. said the key themes to observe in 2022 include strong interest in digital assets and consumer products, surge in digital healthcare, shift to environmental, social, and corporate governance (ESG), calibrated valuation expectations, and continued appeal of young and digitizing population.

“While firms are understandably eager to capture these next waves of growth, long-term success will be achieved by those who pay more attention to their core investment themes and diligence, particularly in ESG integration as increasing pressures for businesses to take steps in climate action, diversity, equity and inclusion has caused a definite and enduring shift in the industry’s investment approach,” said Tom Kidd, partner in Bain & Co.’s Southeast Asia private equity practice.

“The economic growth that could be added to Southeast Asia from a number of exciting sectors is still substantial,” he added. — Revin Mikhael D. Ochave