PE activity in SE Asia picks up in Q3 thanks to Grab, Go-Jek

Southeast Asia witnessed a pick up in private equity (PE) investments in the third quarter of 2016 at $1.72 billion spent across 30 deals, a positive news when compared to a muted first half of year, largely driven by fundraising by two ride hailing applications– GrabTaxi and Go-Jek.

Taxi hailing app GrabTaxi raised $750 million while Indonesia’s Go-Jek raised $550 million in the past quarter and driven by this over 95 per cent of capital raised in the quarter was invested in Singapore (54 per cent) and Indonesia (42 per cent), according to a recent report on PE in Southeast Asia from EY.

“The majority of the deals continued to be focused on Singapore, accounting for 57 per cent of the deal count, and a continued interest in Indonesia was observed, resulting in six deals being closed,” the report has pointed out.

The total number of deals closed in third quarter of this year was 30, in line with the average across the last three years but slightly down on the same period in 2015, when 36 deals where closed.

pe-sea-tanu1

While Indonesia with its vast population and scope for growth has surfaced recently on the region’s PE scene, Southeast Asia has historically been focused on Malaysia and Singapore. The three markets together now account for over 85 per cent of all investments across the past five years.

“Increasingly we are seeing PE diversify from these core markets with a significant amount of time and resources being spent investigating the opportunities in markets such as the Philippines, Thailand and Vietnam,” the EY said.

These markets, which have been dominated by local funds such as Lombard and VinaCapital to date, are being actively targeted by regional PE houses at a level far greater than before. Moreover as these economies continue to evolve, the number of opportunities of sufficient size is increasing.

However, investments into regions such as Cambodia, Laos and Myanmar remain limited and focused on building infrastructure such as banking and communications.

Further, political instability remains one of the key concerns for investors in the region and this has again come to the fore over recent months. That said, a number of PE investors have publicly stated their ambition and see these markets as a long-term growth story.

pe-sea-tanu2

Technology in focus

Technology remained the most active in terms of sectors with 14 deals in 2016, though lower than achieved in the same period in 2015. That said, there are an increasing number of sizeable deals across tech sector.

“The year 2016 has seen some of the large PE funds get in the tech game. It’s great to see the momentum in this sector, which is a real bright spot. While overall PE deal activity this year to date has been flat, I see great potential given the liquidity needs across businesses in the region,” said EY Asean Leader M&A and Private Equity Luke Pais.

In fact, the two ride hailing apps GrabTaxi and Go-Jek raised a total of $1.3 billion. Go-Jek funding that was led by KKR and Warburg Pincus and SoftBank led GrabTaxi in September both had a common theme — focus on technology.

While Go-Jek is entirely focused on Indonesia at present, Grab has stated that its key goal is to further penetrate the Indonesian market.

According to CB Insights, there are now four unicorns (the others are Garena and InMobi, with Lazada having been acquired by Alibaba), three of which are in Singapore; the sixth highest number of unicorns in any country. “This underlines the region’s vast potential for technology-based business models,” the report said.

Given that Southeast Asia is behind markets such as Japan, Korea and China in the tech maturity curve, it means that market is ripe to bring in business models that are proven elsewhere and can be rolled out in the region.

Exits

“There remains limited disclosure around PE exits in the region, with a number of deals going unreported and therefore not captured by the analysis,” EY said.

Nevertheless, exit activity in third quareter saw two deals being completed. The largest deal was SPi Global’s, a CVC portfolio company, sale of its CRM business to Japan-based Relia in a $181 million acquisition.

The other deal in the quarter was EQT’s disposal of its investment in Econ Healthcare back to the founders.

Another point noted by the report is that Southeast Asia remains high on the agenda for Japanese corporates. “Across the past 24 months, there has been a notable rise in the amount of time being invested in trying to identify investment opportunities across the region,” it noted.

Also Read:

PE-VC firms raise $4.9b via India-focused funds in 2016

Malaysia 2016: PE/VC activity sees uptick with 27 deals valued at $1.13b

The 40 people who matter in the Indian startup ecosystem

PE firm KKR in talks to buy Hitachi’s power tools unit

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.