Despite a lacklustre 2020, SE Asia’s PE market remains attractive: Bain

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Southeast Asia remains an attractive market for private equity even as deal value in the region declined 16% in 2020 over the previous five-year average due to COVID-19 related restrictions, according to global advisory firm Bain & Co.

During the SEA PE&VC Trends presentation Friday, Alessandro Cannarsi, partner and leader at Bain SEA Equity practice, said the macro trends in Southeast Asia are still present despite COVID 19. These include a strong regional demographic, rising consumer class, the rapid shift to digital, among others.

The shift towards digital during the pandemic is especially hopeful for the tech sector. “A lot of this growth is actually sticky … these new users that came up online for the first time [during] COVID-19 … continued to use online services even when COVID restrictions were lifted,” Cannarsi said. 

Digital adoption has widened its reach within the Southeast Asian society and is no longer about young professionals in tier-one cities, Cannarsi added. Even the older demographics, the lower-income segments, and those in tier-two and three cities have now come aboard. 

Chart from Bain & Co

“SE Asia is going to grow 20-30% per year in the next few years, new models and new companies are going to be built and succeed and that’s interesting for investors to look at,” Cannarsi said.

According to the Bain report, 16% of the world’s new consuming class in 2030 will come from Southeast Asia. That means the region will add about 140 million people to its consuming class, with Indonesia accounting for 45% of new consumers.

“So there will still be opportunities for investment [in Southeast Asia] but they really need to be assessed carefully against a new baseline of post-COVID recovery as other industries, like physical retail consumer products, food and beverage, the outlook is quite uncertain,” he said.

In 2020, deal value in Southeast Asia declined 16% over the previous five-year average, pulled down by travel restrictions caused by the pandemic. Activity dipped sharply in the second quarter but recovered in the succeeding quarters.

Chart from Bain & Co

“Southeast Asian investment professionals were overwhelmed to some degree last year by the complexity of having to think through the corporate implications on deal-making and exits across … six or seven different geographies,” said Usman Akhtar, a partner and head at Bain Private Equity SEA during a Q&A segment on the data. 

Singapore was the only country in Southeast Asia to see deal count and value rise slightly as it houses most of the tech companies’ headquarters though their operations span regionally, and because it was less impacted by the pandemic compared to its neighbours. 

“They managed the pandemic and the numbers and health consequences relatively well, and therefore as a result, confidence in Singapore assets grew,” Akhtar said. 

Among the investors looking at Southeast Asia, there were concerns about high valuations, particularly in Indonesia, while most investors also raised the issue of a lack of deal opportunities in Thailand and the Philippines. 

Chart from Bain & Co
Chart from Bain & Co

Within Asia-Pacific, deal value hit a record high in 2020 at $185 billion despite the COVID-19 disruption.

The robust dealmaking helped Asia-Pacific assets under management rise to $1,200 billion, or 26% of the global PE market, the report noted.

Chart from Bain & Co
Chart from Bain & Co

However, while Asia Pacific’s PE deal value reached its highest during the pandemic year, exits and fundraising remained challenging. Secondary and trade exits continued to fall while fundraising activities declined for the third consecutive year.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.