Strong start for private equity deals across Southeast Asia in 1Q18

Singapore, 9 July 2018

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  • A total of 19 PE and VC deals hits historic value of US$21.9b in 1Q18
  • VC fundraising more than doubled, with focus on technology sector
  • Exit activity expected to remain healthy over next 12 months

Private equity (PE) and venture capital (VC) investment value increased manifold in 1Q18. The quarter saw 19 deals valued at US$21.9b completed, compared to 26 deals worth a far-lower US$687m in 1Q17. Deal value in 1Q18 hit historic level on the back of the completion of two large-size secondary transactions – Global Logistic Properties (GLP) and Equis Energy.

This is according to the EY Private equity briefing: Southeast Asia (June 2018) report, which offers a roundup of the PE deals and capital activities across major sectors in the region.

Contributing to 90% of the aggregated deal value in 1Q18, Singapore maintained its leading position in PE and VC investments across Southeast Asia (SEA). The city-state witnessed 12 completed deals valued at c.US$19.8b in 1Q18. The key sectors attracting the majority of investments in SEA were real estate (55%), energy (23%) and technology (19%).

Fundraising slowed in 1Q18 with only US$821m raised, compared to US$3.4b raised in 1Q17. However, VC funding in 1Q18 witnessed an upward swing with US$369m raised in 1Q18, mostly in the technology sector, up from US$189m in 1Q17. This could translate into an increased volume of VC-backed technology deals in the near to mid term.

Mr. Luke Pais, EY Asean M&A and Private Equity Leader, Ernst & Young Solutions LLP says:
“We believe this is the golden age of private equity in the region. Businesses and entrepreneurs are actively looking for capital and they clearly understand the value that private equity can bring beyond just investment dollars. In fact, a large part of the investment conversation today is focused on creating value together. Further, the technology sector continues to shine as we see the emergence of more unicorns and baby unicorns.”

In terms of exits, 1Q18 saw 9 completed deals with total exit value of US$17.7b – the largest total exit value recorded since 2013 due to the two secondary buyouts of GLP and Equis Energy. The two deals reflect a growing trend of secondary buyouts in SEA.

Planning the exit

With the growing number of PE assets coming to the end of their investment life, exit activity is expected to remain healthy over the next 12 months.

Pais shares:
“We are seeing more PE firms determining the right time to sell 12-18 months prior to exit to allow for adequate planning. Thoughtful exit planning results in increased exit multiples and a much smoother exit process.”

To optimize the sale process and maximize value, some of the approaches that PE firms can consider include:

  • Planning early: This allows enough time to articulate and drive the business plan on which the exit will occur. Further, it allows optimization of the exit structure and balance sheet
  • Leverage the power of data: Analytics can transform a deal life cycle, providing faster and higher quality data preparation and analysis, including unstructured data sets (which are common in emerging markets), to facilitate a more focused discussion around key value drivers. This allows PE firms to unlock opportunities, reduce critical risks that can be avoided earlier in the process, and create a compelling and relevant value case for each potential buyer.
  • Embed digital into the business strategy: Build and execute a digital transformation theme in the business strategy of the portfolio company.

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Notes to Editors

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This news release has been issued by Ernst & Young Solutions LLP, a member of the global EY organization.