Singapore is the only Southeast Asian market to report growth in private equity transactions and transaction value in 2020: report, business news and news
Singapore was the only Southeast Asian market to experience growth in private equity transactions and transaction value in 2020, against a backdrop of a sharper slowdown in investment activity in the region compared to elsewhere in Asia-Pacific.
A report released yesterday by global consultancy Bain & Company noted that the muted activity in Asean was due to factors such as the varied impact of Covid-19 in countries in the region and border restrictions limiting cross-border travel, which is usually required to complete due diligence process.
About US $ 9 billion (S $ 12 billion) in private equity contracts were concluded in the region in 2020, down from US $ 12 billion the year before. The number of transactions fell to 106 from 115 in 2019.
But there were signs of a recovery from the third quarter of last year, with $ 2.2 billion in deals closed from July through September. This amount rose to 3.8 billion US dollars in the last quarter.
Bain & Company’s private equity partner Usman Akhtar highlighted in a virtual panel that Singapore was less affected by the coronavirus pandemic last year than some of the other Southeast Asian markets, managing relatively well. infections.
“As a result, confidence in Singapore’s assets has increased,” he said.
Another factor in Singapore’s resilience is that many companies are headquartered in the country and therefore investments in these companies are recorded here, although they may have significant operations outside of Singapore, Mr. Akhtar.
Overall, fundraising has weakened globally, with funds focused on Asia-Pacific falling 32% last year compared to 2019.
The internet and tech sector remains dominant in terms of transaction value for Singapore and Indonesia, while healthcare is starting to see a notable slice of the pie. Digital health services are expected to experience continued growth across the region over the next three to five years.
Private equity firms are increasingly focusing on digital health and e-learning opportunities in Southeast Asia, with growth expected in these sectors as well as e-commerce, although assessments can be difficult.
Meanwhile, sectors such as physical retail, consumer products and offline entertainment face uncertain prospects and require in-depth company and industry-specific assessments, the report noted.
The next wave of fast growing companies will not look like the unicorns that have emerged today and will have to develop in a different way, said Alessandro Cannarsi, partner of Bain & Company.
“To a certain extent, there will be partnerships between existing companies and emerging new winners in Southeast Asia and that will make this ecosystem really interesting from an investor’s point of view,” he added. .
At the same time, general partners have stepped up their efforts and focused on environmental, social and corporate governance over the past three to five years, a trend that appears to be continuing.
The report also notes that parallel capital investments have become an important feature of the Southeast Asian region’s landscape.
Parallel capital allows institutional investors to access private equity assets without relying on general partners, which means lower costs and increased control over investments, and is often viewed as having a longer investment horizon.
Examples of parallel equity investors are Singapore sovereign wealth fund GIC and investment firm Temasek, Abu Dhabi Investment Authority, as well as family offices and companies.
More than 75% of the 30 best-funded startups in Southeast Asia have received phantom capital.