Singapore gets lion’s share of S-E Asian private equity amid regional decline: Bain report 

SINGAPORE - Singapore dominated a subdued South-east Asian private equity market in 2023, as investors executed fewer and smaller deals due to macroeconomic and geopolitical concerns.

The Republic secured US$3.7 billion (S$5 billion) of capital investment in companies that are not publicly traded, out of US$9 billion for the whole region, said global management consultancy Bain & Company in its South-east Asia Private Equity Report 2024.

Singapore also led in transaction count, picking up 62 of the 109 deals done across the region.

However, private equity (PE) markets across the region, including in Singapore, suffered a drop in activity. 

PE deal value for Singapore was down 50 per cent from US$7.4 billion in 2022, while the whole of South-east Asia saw a 35 per cent decline from US$13.7 billion.

Singapore’s deal count fell 37 per cent from 99 in 2022, while the region as a whole saw a 40 per cent decline from 182 deals previously.

Mr Suvir Varma, advisory partner at Bain’s global PE practice, told The Straits Times on May 29 that investors are concerned about the macroeconomic outlook. 

Factors such as high interest rates, upcoming elections and China’s impact on South-east Asia will continue to weigh on investor sentiment, he said, adding that investors will need “clarity” before allocating capital. 

“There are green shoots of attractiveness… Valuations have stabilised, but there is uncertainty caused by these macro factors,” Mr Varma said. 

Bain noted that the drop in PE activity in South-east Asia in 2023 aligns with that for the broader Asia-Pacific region, which saw a 28 per cent fall in deal value, driven by Australia and New Zealand’s 67 per cent plunge. 

Deal value fell 37 per cent in Greater China, 44 per cent in India and 18 per cent in South Korea. Japan bucked the trend with an 80 per cent increase. 

“It has been a challenging year for deal-making, exits and fund raising in the region,” said Mr Usman Akhtar, head of Bain’s South-east Asia PE practice, who is based in Singapore.

“There is significant pent-up demand to deploy capital in South-east Asia, but to help spur exits, investors acknowledge the need to generate value across cost and topline opportunities,” Mr Akhtar noted in the report. 

Exit value in the region plunged to US$2.8 billion in 2023, down 60 per cent from 2022. Singapore and Indonesia saw the most exits. 

Looking ahead, Bain highlighted key trends in South-east Asia’s PE market, including the healthcare sector, which accounted for 24 per cent of deal value in 2023, and financial technology, which has seen its total deal value grow at a compound annual rate of 12 per cent from 2018 to 2023. 

It also noted that urbanisation and gross domestic product per capita continue to rise in South-east Asia and consumption is expected to grow, which is why consumer product companies will become a “hot spot” for PE investors. 

Mr Akhtar said that South-east Asia’s PE and venture capital investment market remains under-penetrated as a percentage of GDP, and more efforts are needed to revive deal activity in the region.

He said: “Stock exchanges need to build their velocity, liquidity and depth. Additionally, there must be visible operational improvements in PE-owned assets, as relying solely on the macro story is no longer sufficient.”

Mr Varma said that in Singapore, “defensive” sectors such as healthcare and education are becoming more attractive to investors.

Local companies in the fields of fintech, artificial intelligence and precision engineering have also piqued investor interest. 

“Singapore has a natural talent base and an advantage when it comes to export-driven businesses,” he said.