Indonesia’s 2016 PE deals & exits see slowdown; but market still attractive: Bain & Co

Private equity deal value in Indonesia reached $1.6 billion in 2016 through 10 deals, a pullback from 2015’s $2.1 billion, a study by Bain & Co shows. Meanwhile, Indonesia exit value continued to fall from 2013’s record high of $2.2 billion to $257 million.

The report revealed that decline in value was largely driven by the absence of mega deals. The largest deal was the $550 million Go-Jek investment by KKR and Warbug Pincus, which also drove the internet sector to take up the largest share of the total deal value at $585 million. Along with the other 2 internet-related deals, this meant internet accounted for 37% of deal value in 2016.


However, Bain is still in the view that exit environment remained broadly favorable in Indonesia, with strong corporate M&A activity in a market where most of the PE exits are trade exits.

Nevertheless, funds had fewer ripe assets to harvest given low investment in 2011-14.

“Indonesia fundraising should be looked at holistically, as most of the Indonesia funding comes from Southeast Asia and Asia Pacific-focused funds. Looking at Asia-Pacific overall, fundraising activity lagged as investors took a pause after a few strong years,” Bain team stated in a report sent to DEALSTREETASIA.


Lack of capital is certainly not a challenge in the region, with two years’ worth of dry powder, and many of the SE Asia funds seeing fundraising as their lowest priority in 2016.

“These numbers, however, can be interpreted to underplay the amount of “effective” funds being directed into Indonesia. For example, a very large share of the substantial sum of money Grab raised in 2016 will end up being directed into the Indonesian market, which is by far the largest market for that pan-SEA business,”

There was also a significant jump in growth capital last year, which was recorded at $1.3 billion, representing a five-times increase over the five-year average of $211 million.

SEA largest economy maintains appeal

Despite the apparent slow-down, analysts believe that Indonesia – which accounts for 40 percent of the Southeast Asia population – will continue to attract investors.

For Warburg Pincus, who last year agreed to join a $550 million deal for Go-Jek, Indonesia’s growth and opportunities that come with it is inevitable.

“In Southeast Asia, it is very much a blank canvas and early days there.  Now that you are starting to see the rise of e-commerce in countries like Indonesia, it is early days for logistics and the need in terms of government support for infrastructure process is significant. We need to bring down logistics cost as a percentage of GDP to make things much more efficient. The way to do that is ultimately, you need modern warehouses and third party logistics providers who can create more value for their clients,” Jeffrey Perlman, Managing Director and Head of Southeast Asia for Warburg Pincus, told this portal recently.

“New economy” deals will drive deal activity. However, it will require a differentiated technology and/or disruption-focused thesis, especially as sky-high valuations leave little margin for error.

“Indonesia remains an attractive place. But general partners (GPs) will have to create a differentiated angle to get around Indonesia’s unique challenges,” said Bain.

Some of the challenges are mismatch in valuation expectations, potential local economic and political hurdles, and difficulty recruiting and retaining talents. These are the top three concerns from investors surveyed by Bain, among other issues such as global macro uncertainty, and increased competition.

Also Read:

Indonesia’s Go-Jek raises over $550m from KKR, Warburg to battle Uber and Grab

PE dry powder hits record in 2016 amid heightened competition: Bain & Company

2016 Second best year in record for APAC’s PE, Internet fever remains strong: Bain

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