SEA hits record private equity deals at $25b in 2021

Southeast Asia sealed private equity (PE) deals worth US$25 billion in 2021, marking one of the “most impressive” turnouts in its history after the region was battered by travel restrictions induced by Covid-19 the previous year.

Image credit: Timmy Loen

The Asia-Pacific region made up over a quarter of global PE deals in 2021, with Southeast Asia accounting for the second largest growth in the volume of deals – only behind Japan – according to a report by Bain & Company.

“While PE investors continue to believe they can get strong returns in the region over the next three to five years, we also see them putting more emphasis on topline growth and operational improvements as expectations of multiple expansion become relatively muted,” said Usman Akhtar, partner at Bain & Company’s Southeast Asia private equity practice.

Photo credit: Bain & Company

Deal values surged in Singapore, Indonesia, and Vietnam, pushed by an influx of capital into ecommerce, logistics, and tech firms in the region. The healthcare and financial services sectors are also increasingly becoming investment targets, representing 18% and 9% of the deal count, respectively.

In 2021, the value of exits in Southeast Asia doubled from the previous year’s levels. The growth is driven by Singapore as maturing tech companies such as Grab debuted in the public market.

Photo credit: Bain & Company

However, the Southeast Asian tech giants that went public in 2021 have been hit by global market weakness. In the short term, investors could exercise caution over these firms by setting valuation expectations on private market tech investments to reflect the current environment.

Meanwhile, over 90% of surveyed PE funds expect to increase efforts and focus on sustainability and environmental, social, and corporate governance (ESG) in the coming three to five years, with more than half of the assets for diligence including an ESG component. The top ESG investment themes are clean energy; safe, fair, and inclusive communities; and sustainable food and health.

See also: What it takes for Gojek to go entirely green

Other trends in the region that are seeing strong investment interest are in digital assets that include cryptocurrencies and NFTs. Digital healthcare is also poised for “significant growth with ample headroom” for opportunities.