Private equity investments It is being reduced Around the world, as “higher for longer” interest rates and uncertain global growth have dampened investors’ appetite for risk,
Southeast Asia, which just a few years ago was seen as an emerging hotspot for the digital economy, is no exception. A new report from Bain and Company shows that private equity deals have declined in the region, despite positive growth expectations and the region's potential to benefit from reshoring trends from global business.
The value of deals in Southeast Asia decreased by 39% to reach $9 billion in 2023, compared to the current average between 2018 and 2022. The total number of deals also decreased, falling to 109, down 24% compared to the previous average. Transaction values in the region have returned to what they were in 2020.
However, Southeast Asia's performance is roughly comparable to other Asia-Pacific markets. The value of deals in Greater China and India decreased by 58% and 41%, respectively, during the same period.
One market that performed well? Japan, which achieved a 183% increase in deal value compared to the current average between 2018 and 2022.
Singapore and Indonesia accounted for the bulk of Southeast Asian deals, both in value and number. “Singapore used to be number one,” said Usman Akhtar, senior partner and head of Bain's private equity practice in Southeast Asia. “Singapore is a geographical area that attracts a lot of companies with regional ambitions. This does not necessarily mean that all of this goes into economic activity in Singapore, but that is where companies are based.
Indonesia typically ranks second when it comes to attracting private equity investment, according to Bain. The country is the largest economy in the region and boasts a rapidly growing middle class.
Southeast Asia reported an average of $10 billion to $11 billion worth of private equity-backed investments between 2018 and 2020, rising to $27 billion in 2021, as the COVID-19 pandemic took hold. fuel Investment boom in the Internet sector.
The internet and technology sector continues to receive the most private equity investment, accounting for more than half of all deals since 2018. However, healthcare is rapidly growing as an attractive target for investors, according to a Bain report. The company also expects that rising incomes in the region will make the consumer products sector an attractive point for investments.
If 2023 was difficult, 2024 is unlikely to be much easier. A Bain survey found that investors expect less favorable returns over the next three to five years and are concerned about difficult exit terms for their investments.
Dealmaking in Southeast Asia has been slow so far this year. Just $1.4 billion of private equity deals have been agreed in Southeast Asia in the first quarter of 2024 so far – or $5.6 billion at an annual rate, less than the $9 billion deals from last year.
