SINGAPORE - Almost a third of the private equity deals in South-east Asia last year were in the Internet sector, a new report has found.
Research from management consultancy Bain & Company showed that Internet-related deals were the fastest growing sector in 2015, making up about 30 per cent of deals done in the region.
The value of these deals in 2015 were 2.4 times higher than the average over the past five years.
However, it was a relatively subdued year on the whole for private equity.
Economic uncertainty, mounting competition and expensive valuations blunted activity across the region last year, according to Bain.
Deal value across South-east Asia slid to US$4.2 billion, a third of the five-year average and the worst showing since 2004.
"It was not a good year in terms of putting money to work," said Mr Suvir Varma, who heads Bain's private equity practice in Asia Pacific.
Singapore and Indonesia were the only two countries in the region where deal activity held up, the Bain research found.
Examples of major deals done in Singapore last year include Baring Private Equity Asia's S$450 million acquisition of precision engineering firm Interplex Industries, and a US$350 million funding round raised by Grab (formerly known as GrabTaxi). Investors included US investment firm Coatue Management and China's sovereign wealth fund China Investment Corporation.
Private equity investors will continue finding it tough to realise outsize returns, especially since competition for deals is expected to intensify, Bain's research found.
This means prices of potential acquisition targets are also climbing, contributing towards the relatively muted level of activity last year, said Mr Varma.
"It's not because capital is not available, it's not because great companies that are growing are not available. It's just the competition to invest in them is pretty high," he added.
But venture capital funds - which invest in start-ups with strong growth potential - are a bright spot in the region, said Mr Varma.
The number of such smaller deals (valued below US$10 million) picked up last year to reach 102, from an average of 59 per year between 2010 and 2014. The internet and technology sectors were once again major contributors.