Secondaries will become a popular exit choice in Southeast Asia for private equity (PE) firms in 2024, according to consultancy firm EY.
In a report titled ‘EY Quarterly Private Equity Update: Asean (2023)’ the firm noted that 2023 was a slow year for both PE fundraising and exits in the region. “The two are somewhat linked as a slower return of capital to limited partners (LPs) resulted in a lower level of commitment to new funds raised,” said the report. “We expect to see higher exit activity in 2024 with secondaries being a popular exit choice.”
There were 13 PE-backed exits cumulatively valued at $3.3 billion in 2023 in Southeast Asia, show EY data. This compares with 11 exits valued at $6.7 billion in the previous year.
The biggest exit recorded in Southeast Asia in 2023 was TPG’s sale of its 35% stake in Singapore Life Holdings (Singlife) to Sumitomo Life Insurance Company (Sumitomo Life) in December 2023. EY estimated the exit value at $1.193 billion. Sumitomo Life also planned to buy the shares of all other remaining shareholders, giving the Japanese insurer 100% ownership of Singlife. TPG had invested in Singlife in 2020.
The second biggest exit was sealed towards August 2023 by Advent, Bain Capital, and GIC who sold off their minority holdings in QuEST Global Services at an exit value of $600 million to PE giant Carlyle. The three had acquired their stakes in QuEST for $350 million in 2016 from Warburg Pincus.
Chinese private equity firm DCP Capital’s sale of its Singaporean portfolio firm MFS Technology, at an exit value of $460 million, was the third biggest exit of 2023. Shenzhen-listed Victory Giant Technology acquired MFS Technology, a flexible printed circuit board manufacturer, in July last year.
PE investments
As with exits, PE investments were also down in 2023 in Southeast Asia, according to the EY report.
The region wrapped up 2023 with a total of 22 PE deals deploying $3.9 billion. This was down from 38 deals that deployed $6.7 billion in the previous year.
Health care deals accounted for more than a third of PE investments in Southeast Asia in 2023, followed by telecommunications and digital infrastructure at 31%, and business services at 15%.
EY said that it expects private credit to gain momentum as an asset class in addition to infrastructure and real estate.
EY expects private credit, infrastructure and real estate to gain momentum.
EY forecasts that PE investments will see an uptick this year. The themes that will dominate Southeast Asia’s PE landscape include technology and artificial intelligence (AI), which is creating a significant demand for digital infrastructure. The transition to a low-carbon economy is creating investment opportunities in energy and other related sectors.
The driving demand for consumer products, services, better quality healthcare, accessible financial services and high-quality education is creating an aspirational customer which will also be one of the themes driving the PE landscape, the report added.
“SEA’s young workforce and growing middle class will continue to generate demand for innovative solutions, providing opportunities for PE portfolio companies as well as PE investments for companies seeking funding,” said Luke Pais, EY Asia-Pacific Private Equity Leader.