Southeast Asia’s private equity (PE) and venture capital (VC) investments surged 83.4% year-on-year in the second quarter as investors bet on the prospects of higher economic growth, a rising middle-class population, and a strong technology sector, according to a report from Ernst & Young (EY).
There were 36 PE and VC deals concluded in the region in the three months to June 30, with total investments of US$1.3 billion, sharply up from $709 million a year ago.
Over half of this was in Singapore, with $739 million invested in 20 deals, EY says in the report released on October 30. Malaysia was second with 26% of deals, followed by Indonesia with 14%.
The technology sector accounted for 19 of the 36 deals and drew one-quarter of total PE and VC investments, after consumer products and retail, which accounted for 30%.
“Technology will remain a high priority sector in the region,” the report says.
Overall, the largest investment was the $312 million privatisation of Singapore crane supplier Tat Hong Holdings Ltd by the family of Roland Ng San Tiong, its chief executive officer, and Standard Chartered Private Equity.
Two of the largest consumer product deals were London-based CVC Capital Partners’ $250 million investment in Malaysia’s Munchy’s Group and a $150 million investment in Indonesia PT Garudafood Putra Putri Jaya. The investee companies are both snack food manufacturers.
There were four PE exits in the second quarter, valued at $443 million, down 28% from a year ago.
“With the growing number of PE assets coming to the end of their investment life, we do expect exit activity to remain healthy over the next 12 months,” EY says. “We expect the momentum in deal activity to continue for the rest of the year. PE fundraising remained robust despite being lower than the record levels in previous years.”
Six Asia Pacific-based PE and VC funds with a focus on Southeast Asia had their final close in the second quarter, raising a total $942 million. The average fund size was $157 million, 24% higher than in the same period of 2017, when 11 funds raised a total $1.4 billion.
The report notes that Southeast Asia-focused fundraising by global PE houses remained strong in the second quarter, with US-based Blackstone Group and AEW Capital Management closing funds worth $2.3 billion and $1.1 billion, respectively, this June.
“Notably, two of the top three PE and VC funds based outside of Asia with a Southeast Asia investment focus that closed (in the second quarter of 2018) were buyout funds,” EY says.
Real estate and food technology were the dominant strategies, it adds, noting that the second-largest fund that closed – the AEW Value Investors Asia III – “is committed to invest in commercial assets”.
