Heat is on for PE funds to derive value in S-E Asia: Bain

THERE remains too much private-equity (PE) money chasing too few deals in South-east Asia, and one consultancy has made an argument for PE funds to relook the ways in which they are sieving value from their investments.

As it is, exit value by PE funds in South-east Asia last year slid to US$4.4 billion - the lowest level since 2006, a report by Bain & Company showed on Friday. The exit count rose slightly from 26 to 30, but half of that was valued at less than US$50 million, it noted.

By contrast, exit value in the Asia-Pacific - which would include PE activities in China, India, Japan, Korea and Australia - reversed from a three-year decline to hit US$111 billion, the same level as in 2010.

Suvir Varma, head of Bain's private equity practice in the Asia-Pacific, said at a conference: "We have to see the IPO market in South-east Asia open up." He added that funds also have to renew their push for performance and engage in more "roll-up-your-sleeve deals", especially now that the holding period of funds has risen to a new high of nearly five years.

"Given the backlog of what needs to be exited, it's got to be done at the right return points," said Mr Varma, as he called for a "catch-up in the exit side".

Exit activity has tracked below deal flow for years now.

"This has to balance at some time. The trend needs to get closer to parity." It is a competitive space, with Bain estimating that there are about 120 funds in the region, actively looking for deals.

"That's a lot, given the US$6 billion dollar market that we had last year," he said. Investment value stood at US$5.9 billion in South-east Asia at the end of last year, slightly higher than in the previous year, but 7 per cent below the five-year average.

Deal value in the Asia-Pacific, meanwhile, shot to a new record of US$81 billion. This region also sees acute competition among corporates, regional and global private equity funds, as well as large sovereign wealth funds and state investors, Mr Varma noted.

Over the last few years, Singapore and Malaysia have continued to account for two-thirds of PE activities in South-east Asia, reflecting the Republic's position as a key centre for global or regional corporate headquarters to be stationed at, he added.