Press release

Themes to watch in SEA private equity market

Themes to watch in SEA private equity market

Alternative asset classes, sectors in focus, and the quest to re-ignite deployment activity

  • May 30, 2024
  • min read

Press release

Themes to watch in SEA private equity market

SINGAPORE – May 30, 2024 – The rise of alternative asset classes, sectors in focus such as healthcare, fintech and consumer products, and investors’ quest to get back to active dealmaking are key themes to watch in Southeast Asia’s (SEA) private equity (PE) market, according to Bain & Company’s Southeast Asia Private Equity Report 2024 launched today.

While the second and third quarters of 2023 saw growth over the first, SEA’s PE market was not spared from the slowdown in deal activity seen globally. Overall deal value in SEA fell 39% to US$9 billion last year compared to the previous five-year average (2018-2022), while deal volume dropped 24% in the same period. Like in previous years, growth investments accounted for majority of deal flow in the region. Singapore and Indonesia continued to contribute to the bulk of deals.

Deal activity dropped off in the first quarter of 2024. At US$1.4 billion, the region’s deal value was back at the same level as Q1 2023.

“It has been a challenging year for dealmaking, exits and fundraising in SEA. Findings from our industry survey point to some of the drivers behind these challenges. GPs and LPs are telling us that the areas they are most concerned about are challenging exit conditions, lack of deal opportunities and uncertain economic outlook. There is significant pent-up demand to deploy capital in SEA, but to help spur exits, investors acknowledge the need to generate value across cost and topline opportunities,” said Usman Akhtar, head of Bain & Company’s SEA PE practice, based in Singapore.

Bain & Company’s survey also revealed that SEA investors expect to face competition from both local and global PE firms and strategics this year. Learning from experience in recent years, they are also now focusing more heavily on the need for attractive entry multiples and clear exit strategies in new deals. In addition, SEA investors view cost improvement and M&A as increasingly important levers to drive returns.

The report highlighted key themes to watch in SEA’s PE market:

Rise of alternative asset classes: Global infrastructure and private credit fundraising are rising. According to a June 2023 survey by Preqin, more LPs indicated that they plan to invest more in private credit and infrastructure funds compared to other alternative asset classes. Since 2021, Bain has observed that PE-focused alternative asset managers have raised large Asia-Pacific-focused infrastructure and credit funds.

Healthcare: 2023 marked a crescendo in healthcare dealmaking, accounting for 24% of SEA deal value, due to several large deals in the provider space. The previous high was in 2019 where healthcare deals made up 22% of SEA deal value.

Fintech: Despite a broader tech and internet slowdown, fintech and insurtech were key investment trends in SEA in 2023 with funding increasingly focused on scale players with strong business models. Fintech, in particular, has seen deal size increasing between 2018 and 2023, with total deal value growing at a 12% CAGR in the same period.

Consumer products: As population, urbanization and GDP per capita continue to rise in SEA markets, Bain expects consumption to grow. Hence consumer products companies will become a hotspot for PE investors particular in the areas of (1) large scale businesses with strong brand health fundamentals but suffer from challenged P&Ls that require performance improvement changes, (2) large scale and heritage businesses with currently weak brand health fundamentals but sound underlying P&L that can be leveraged to return to growth, (3) companies with limited potential for further core growth with potential for growth through product, channel or geographic adjacencies, (4) small scale businesses with early on penetration/growth curve, strong brand health fundamentals and healthy P&L, (5) improving market positioning or reducing cost through consolidation and integrating multiple sub-scale players, and (6) carveouts of established businesses with strong fundamentals but no longer aligns with parent company direction.

Quest to re-energize dealmaking: Dry powder levels across Asia-Pacific (including SEA) remain very high, while investors in SEA appear less concerned about entry valuations than they have been in previous years. SEA investors have accumulated significant pent-up demand to put their capital to work and start to change the recent trajectory of the region as a PE destination. Penetration of the PE industry has significant headroom when compared to several other parts of Asia.

“SEA PE remains underpenetrated as a percentage of GDP given the size of target opportunity pool. Moving forward, we think the industry in SEA needs a few things to help unlock a resurgence in deal activity. Exit overhang needs to be addressed with proactive steps required to exit aged assets. We think stock exchanges need to strive to build their velocity, liquidity and depth. There also needs to be visible traction in operational improvements in PE-owned assets as playing the macro story will no longer suffice,” said Akhtar.


For media enquiries and to download a copy of the report, please reach out to:

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