Private equity (PE) deal value in Southeast Asia sank 52% year-on-year in 2022 to $13 billion, against the uncertain macroeconomic backdrop and challenging exit conditions, according to Bain & Co.’s Southeast Asia Private Equity Report 2023.
Deal count also fell from 207 in 2021 to 176 last year — a 15% decline. While dealmaking in the region was robust in the first half of 2022, the activity dipped in the second half of the year, noted the report.
Singapore and Indonesia continued to account for the largest share of investment capital in 2022. The two countries accounted for over 80% of Southeast Asia’s deal value. Though Vietnam represented a small proportion of the deal value in 2022, the country was a substantial contributor to the region’s deal count, the report said.
Growth-stage deals continued to account for the majority of activity in the region, with the largest relative declines occurring in the buyout sector. Growth equity deals continue to dominate the deal flow throughout 2022 followed by early-stage venture deals and buyout deals that became more muted toward the end of the year.
Exit value in SEA also plunged 46% year-on-year as investors faced re-rating challenges in the public market valuations, harming its portfolio performance and opening a limited exit opportunity due to the decline in initial public offerings
Accounting for 55% of total deal volume in the region last year, Internet and technology continued to be the most popular sectors for private equity investment in each country, with healthcare and financial services ranked as the second and third largest sectors across geographies, respectively. The healthcare sector also continued to gain momentum among investors as part of regional trends such as the rise of senior populations and wealthy individuals as well as innovation across the value chain.
“What we are seeing is a natural reaction to the global macro climate. Increasing interest rates, a softening economic environment and general uncertainty over the future have all made it more challenging to get deals done,” said Usman Akhtar, head of Bain’s SEA PE practice.
Bain said in its report that “doing the basics” well by sourcing good deals and bringing value to portfolio companies still remain as a challenge for investors. Its survey also shows that local general partners are shifting “their value creation emphasis to cost-focused efforts”.
“SEA remains an attractive place to deploy capital in the long term. The market fundamentals are there, and investors will be able to find attractive opportunities. However, competition will be intense for these assets and multiple expansion will no longer be a sustainable return driver. That puts more pressure on investors to create value during their ownership period,” said Suvir Varma, senior advisor of Bain’s global PE practice.