PE investors in SEA still awaiting payouts: Bain & Company

Bain & Company released its SEA Private Equity Report 2015

Private equity (PE) investors, who flocked to Southeast Asia in the past few years in hopes of riding a growth spurt, find themselves still waiting for a payout, Bain & Company found in its research.

According to the Southeast Asia Private Equity Report 2015, the consultancy said competition was intense in 2014, with many PE funds fighting for a limited pool of attractive targets.

“As private equity matures across the region, value creation and path-to-control mechanisms will be key to helping investors generate superior returns in the long-term,” the firm said in a press statement accompanying findings from its research.

Bain SEA valuecreation
Source: Bain SEA PE Report [Bain Asia-Pacific PE survey, January–February 2015 (n=145)]

PE funds, or general partners (GPs), nudged investment value to $5.9 billion – just slightly higher than the previous year but still 7 per cent below the five-year average.

Exit count was up slightly, from 26 to 30 last year, but about half were valued at less than $50 million, leading exit value to slide to $4.4 billion – the worst showing since 2006.

“It’s easy to forget that most funds are still finding their footing in Southeast Asia,” Sebastien Lamy, Bain partner and co-author of the report, said.

Further dampening the context was macro uncertainty led by Indonesia’s midyear elections and the coup in Thailand, the firm noted.

As a result, performance varied market-by-market, and the region as a whole delivered timid results.

“They are only now starting to build the kinds of networks that are essential to finding targets against the backdrop of rapidly developing economies,” Lamy added.

 

Bain SEA returns
Source: Bain SEA PE Report [AVCJ (*) Excludes deals <$50M , real estate and infrastructure; Bain Asia-Pac private equity survey Jan-2015 (n = 145)]

Though competition, high pricing and political challenges clouded last year’s PE activity in Southeast Asia, there are several indicators that signal a positive environment in the years ahead.

Among them is the indisputable macro fundamentals, as Southeast Asia’s economy is expected to grow from the 7th to the 4th largest economy by 2030, boosted by strong population growth and a rising middle class.

GDP growth is also forecast to improve in most of the markets, especially Indonesia, where the new regime is sending positive signals to the business community.

Additionally, Bain expects a healthy supply of opportunities for PE capital, given that its survey of 145 senior Asia-Pacific PE executives found that 30 per cent of Southeast Asia GPs believe local companies have a good understanding of, and are more open to the PE value proposition, versus just 5 per cent a year ago.

The research also found anecdotal evidence of more carve-out opportunities as large companies seek to shed Southeast Asian units.

“GPs are increasingly more established in Southeast Asia with deeper networks, which are essential to finding targets and securing deals. They have also adopted a more activist attitude with their portfolio companies, and are seeking further control in minority deal situations.”

In terms of commitment, LPs remain committed to Southeast Asia’s PE market and are confident they can achieve superior returns in the region, the consultancy said.

Bain’s survey reveals that 64 percent of GPs expect Southeast Asia will top China as the most attractive market for new deals in 2015.

Also read:

Optimism in trade sales and secondary sales for APAC PE: Bain & Co

APAC PE activity to remain strong & sustainable in 2015: Bain & Co

2014 has been a year of exits: Bain & Co

Buyout-backed PE exits hit all time high in 2014: Bain & Co

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.