Good momentum for private equity in Southeast Asia in Q1 2024

Private equity (PE) activity in Southeast Asia (SEA) showed good momentum in the first quarter of 2024, an increase of 31% in deal value and 89% in deal volume year-over-year. In Q1 2024, there were a total of 17 deals deploying US$586m in SEA, compared with 9 deals deploying US$447m in Q1 2023. 

Real estate deals accounted for a third (33%) of PE investments by value, followed by health care (28%) and financial services (23%).

This is according to the EY Quarterly Private Equity Update: Asean (Q1 2024), which provides a quarterly roundup of the PE deals along with capital activities across major sectors in Southeast Asia.

Luke Pais, EY Asia-Pacific Private Equity Leader says:

“Deal activity in SEA started to pick up in Q1 2024. We see a number of new deal starts, with activity in certain sectors such as health care, real estate and infrastructure. Given SEA’s estimated gross domestic product (GDP) growth rate of 4.6% in 2024, lowering unemployment rates and strong contribution from tourism, consumer sentiment is also improving and we expect to see more consumer transactions over the course of the year. The realignment of the global supply chain, which is expected to impact SEA favorably, continues to remain an important theme.”

Sluggish fundraising and exit activity

For exits, Q1 2024 saw slower activity. PE-backed exits in SEA fell by about 57% in terms of exit value compared with Q1 2023. SEA’s IPO market also witnessed muted activity in the quarter. The lack of exits, coupled with the high amounts invested in the region over the past few years, have manifested in a growing secondary market.

Fundraising also remained sluggish during the quarter. Only two SEA-based funds were closed, raising a cumulative sum of US$574m. While private credit is still nascent in SEA, it has tremendous growth potential and opportunity for investors amid subdued deal and fundraising activity.

Pais concludes:

“For the rest of 2024, the emphasis on bespoke transactions and unique deal structures, such as secondary deals, minority purchases, convertibles or structured investments, platform acquisitions, are expected to intensify. PE funds are prepared to hold for longer and will continue to drive value creation in their portfolio through operational improvements and bolt-on investments. Opportunities across private credit space will grow, especially in mid-market where bespoke financing solutions are more attractive.”

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