Private equity transactions in S-E Asia rebounded in 2016: report

Singapore

PRIVATE equity (PE) activity in South-east Asia rebounded in 2016 to reach nearly US$7 billion in deal value - spurred by a recovery in Malaysia from "a record low" in 2015.

According to Bain & Company's latest annual South-east Asia Private Equity Report, the US$7 billion is up from the US$4.8 billion recorded in 2015, and 14 per cent more than the 2011-2015 historical average,

Bain's report, released on Friday, described the rally as a welcome result after a sluggish 2015, and occurring despite global uncertainty and "surprises" which included Brexit and the US presidential election.

It noted that the region's PE market in 2016 remained driven by Singapore, which registered US$2.3 billion in deal value across 20 deals. Malaysia saw US$1.7 billion in deal value across seven deals, and Indonesia saw US$1.6 billion across 10 deals.

These three countries contributed to over 80 per cent of South-east Asia's deal value from 2012-2016. The other countries included Vietnam, the Philippines and Thailand.

The Internet sector saw strong interest from PE investors, accounting for a quarter of South-east Asia's total deal value in 2016.

Other emerging sectors of interest comprised agriculture, consumer products, retail, healthcare and education.

Early-stage deal activity (composed of investments under US$10 million each) continued apace, chalking up 102 deals in 2016. This was about 20 per cent higher than the 2011-2015 historical average.

Exit value "overcame flat volumes and zero initial public offering activity" to grow by 26 per cent year on year to US$8 billion in 2016.

Bain attributed this to a strong corporate mergers-and-acquisitions market and five large exits exceeding US$1 billion, compared to just two in 2015.

Sebastien Lamy, head of Bain's private equity practice in South-east Asia, said: "PE markets in South-east Asia are steadily improving, due to a larger pool of targets and more robust general partner networks."

Notably, the report found that limited partners (LPs) - among them Singapore's GIC and Temasek, and Malaysia's Khazanah Nasional - were highly active in South-east Asia, having been involved in 40 per cent of PE deal value from 2012-2016, versus 29 per cent for the Asia-Pacific.

Mr Lamy added: "The healthier momentum has boosted LPs' expectations for the region, putting PE firms in a tough spot as they look for new ways to rally against the effects of high prices and heavy competition, coupled with local macro challenges." In the report, Bain urged PE firms to differentiate themselves by having a "clearly defined sweet spot", accessing all potential opportunities, leveraging advanced analytics for due diligence, and developing a repeatable model for value creation.