Private Equity Investments are being reduced worldwide, as “higher longer-term” interest rates and uncertain global growth have dampened investors’ risk appetite,
And Southeast Asia, only a few years ago considered an emerging hotspot of the digital economy, is no exception. A new report from Bain and Company shows that private equity deals in the region have declined, despite positive growth prospects and although the region may benefit from reshoring trends from the global economy.
Transaction values in Southeast Asia fell 39% compared to the 2018-2022 average, reaching $9 billion in 2023. The total number of transactions also declined, falling to 109, a 24% decrease compared to the previous average. Transaction values in the region are back to 2020 levels.
Nevertheless, Southeast Asia’s performance is broadly comparable to other markets in the Asia-Pacific region. The value of transactions in Greater China and India fell by 58% and 41% respectively over the same period.
One market that has performed well? Japan, which saw a 183% increase in transaction value between 2018 and 2022 compared to the running average.
Singapore and Indonesia accounted for the majority of Southeast Asian deals, both by value and number. “Singapore has typically been number one,” said Usman Akhtar, senior partner and head of Bain’s Southeast Asia private equity practice. “Singapore is a region that attracts a lot of companies with regional ambitions. That doesn’t necessarily mean that everything goes into economic activity in Singapore, but that’s where the companies are based.”
According to Bain, Indonesia typically ranks second in attracting private equity investments. The country is the largest economy in the region and has a rapidly growing middle class.
Southeast Asia reported an average of $10 billion to $11 billion in private equity-backed investments between 2018 and 2020, rising to $27 billion in 2021 due to the COVID pandemic. refueled an 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 transactions since 2018. But according to the Bain report, healthcare is becoming increasingly attractive to investors. The company also predicts that rising incomes in the region will make the consumer goods sector a hotspot for investment.
If 2023 was tough, 2024 is unlikely to be much easier. According to a Bain survey, investors expect less attractive returns over the next three to five years and are concerned about difficult exit conditions for their investments.
Dealmaking has been slow in Southeast Asia so far, with only $1.4 billion worth of private equity deals completed in Southeast Asia in the first quarter of 2024 – or $5.6 billion on an annualized basis, down from last year’s $9 billion.