The overall value of private equity deals in South-east Asia hit US$7.8 billion (S$10.8 billion) last year - 42 per cent up on 2015 although the number of transactions fell, EY said yesterday.
The increase in value was driven largely by a few blockbuster deals, such as the ones involving the region's two ride-hailing apps, Grab and Go-Jek, which together raised a staggering US$1.3 billion in the third quarter, the consultancy said in a new report.
Indonesia's on-demand motorbike taxi service Go-Jek raised US$550 million, led by private equity giants KKR & Co and Warburg Pincus, while Grab raised US$750 million from a funding round led by SoftBank Group. These two investments reflect an increased interest in technology firms and the Indonesian market, EY noted.
"While Go-Jek is entirely focused on Indonesia at present, Grab has stated that its key goal is to rapidly grow in the Indonesian market. This could see the two companies go head-to-head in a more aggressive manner in the future."
Grab has estimated the ride-hailing market in Indonesia to be worth US$15 billion.
"Further, this market looks to increase as diversification into food delivery and logistics continues," EY added. "What the two investments do show is the fast evolution of the technology sector in Asean. This underlines the region's vast potential for technology-based business models."
Other big deals in the region last year included the sale of telco edotco to Malaysian sovereign wealth fund Khazanah Nasional and Innovation Network Corp of Japan for US$600 million and CVC Capital Partners' US$1 billion buyout of funeral service provider Nirvana Asia.
The overall number of private equity deals fell last year to 123 from 162 in 2015 as the year started soft, with investors taking a more tentative approach towards investments but it picked up in the second half of the year, EY said.
There was also a big decline in fund raising last year, the consultancy added. A total of eight funds closed last year after raising a total of US$2.4 billion, compared with 24 funds raising US$16.5 billion in 2015.
However, fund-raising is on the rise this year, EY added.
Some US$2.8 billion was raised in the first three months of the year, compared with US$2.3 billion raised across all of last year.
The trend of large deals last year is expected to set the tone this year, said Mr Luke Pais, the Asean mergers & acquisitions and private equity leader at Ernst & Young Solutions.
"Market conditions in South-east Asia are attractive for private equity investments. While there are short-term headwinds, the long- term prospects of the region remain solid.
"It is a good time for businesses with ambition to consolidate their domestic and regional positions. There remains greater interest in the technology sector as companies and business models of scale emerge. However, we do see deals taking time to complete and hard work required post-investment to realise the investment thesis."