The WeWork debacle may have dampened investor sentiment in tech-related, high cash-burn businesses. Investors have turned cautious and intensified scrutiny on such companies, and expectations of valuations of those businesses are considerably moderated. Yet, quality businesses in other sectors could continue to rise, says Jeffrey Perlman, managing director and head of Southeast Asia at private equity fund Warburg Pincus.
“For companies in spaces that investors want to be in, transactions will be sizeable,” Perlman told DealStreetAsia recently. “In the healthcare space in 2019, valuations probably surprised people quite a bit, in terms of the levels that some of these deals got done at.”
In his view, investors coming into Southeast Asia have been informed by their experience in other, more developed markets. “Investors have increasingly woken up to the opportunities here in Southeast Asia, and we’ve seen that especially over the last 12 to 18 months.”
There are plenty of opportunities in Vietnam, for instance, which has seen increased activity, in part due to the major transactions recently, including Warburg-backed real estate and retail corporation Vincom Retail’s $740-million public offering in November 2017. Such sizeable exits, Perlman said, have “definitely refocused investors on the market [in Vietnam].”
“There’s a group of talented entrepreneurs in the market who’ll continue to be looking for capital to grow their businesses,” he added.
On the other hand, Indonesia is likely to be quieter in terms of investments in the coming year, in Perlman’s view. “There’s still that kind of overhang that comes after an election,” he said. But, the implementation of economic reforms by President Joko Widodo’s administration should help get things going.
“If you have a longer-term horizon and point of view I think some of the continued reforms should position Indonesia in a good spot if you look out five to seven years from now.”
Below are edited excerpts of Perlman’s interview with DealStreetAsia about the private equity landscape.