SINGAPORE (Dec 28): The third quarter of 2016 saw a considerable increase in the amount of capital being invested across Southeast Asia by private equity (PE) players, according to EY, the global provider of assurance, tax, transaction and advisory services to companies.
The overall value of the 32 PE deals completed in 3Q16 was US$1.91 billion (S$2.8 billion), outstripping the total US$1.56 billion invested in the region in the first half of the year.
The quarterly report also revealed that while PE firms in Southeast Asia have been focused on Malaysia, Singapore and Indonesia historically, accounting for over 85% of all PE investments in the past five years, increasingly, PE firms are diversifying and exploring into emerging markets such the Philippines, Thailand and Vietnam. Investments into frontier markets such as Cambodia, Laos and Myanmar remain limited for now.
Luke Pais, EY Asean M&A and Private Equity Leader, says: “The Philippines, Thailand and Vietnam, which have been dominated by local funds to date, are being actively targeted by regional PE houses currently. As these economies continue to evolve, the number of opportunities of sufficient size is increasing. However, political instability remains one of the key concerns for investments. For the frontier markets, investments are still focused on building infrastructure such as banking and communications currently. That said, many PE players still view these markets as part of their long-term growth story.”
The report also revealed that US$1.3 billion, or 85% of the total capital, invested across SEA in 3Q16 went into two ride-hailing applications which focus on Indonesia. In August, Go-Jek closed a US$550 million fundraising in August. The investment valued Go-Jek at over US$1 billion. In Sept, GrabTaxi raised US$750 million and saw investments from undisclosed existing and new shareholders.
According to EY, the market for ride-hailing applications in Indonesia is estimated at US$15 billion, signalling significant growth opportunities. Further, with the potential for diversification into food delivery and logistics, this market segment looks to increase further.
“These two investments highlight the fast evolution of the technology sector in SEA. Given that SEA trails markets such as Japan, Korea and China in the technology curve, and with the liquidity needs of companies, there is a strong potential for PE investments in technology-based business models in the region,” adds Pais.