[SINGAPORE] Private equity (PE) enjoyed upticks in deal value and number of exits in 2024, but the exit environment remains tough, a report by management consultancy Bain & Company has said.
South-east Asia PE deal value hit US$15 billion in 2024, up from US$9 billion the year before, led by large transactions such as that of ST Telemedia Data Centres. That growth in deal value was, however, achieved through 93 deals, fewer than 2023’s 107, Bain reported.
Singapore topped the region as an investment destination. A report by consultancy Deloitte showed that deal value in the Republic hit US$5.2 billion in 2024, up from US$1.8 billion in 2023. Second was Indonesia, which overtook Malaysia in 2024.
Exit values in Singapore rose 30 per cent to US$4.7 billion in 2024, from US$3.6 billion in 2023, Bain reported. The number of exit deals surged 67 per cent from nine in 2023 to 15 in 2024.
Suvir Varma, advisory partner to Bain & Company Global Private Equity practice, noted that, with investment value in the region at US$15 billion to US$16 billion a year, investors are not getting the returns of between two and 2.5 times that they hope for.
“We’re not exiting the amount we need to exit in order to be giving people the amount of returns they expect,” he said.
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Exit conditions are top on investors’ minds in South-east Asia, followed by difficulty in fundraising, Bain found out in its survey of 130 investors. Challenging macroeconomic conditions and geopolitical tensions emerged fifth and sixth in the survey, which was carried out last December, before US President Donald Trump entered office and imposed his slew of tariffs.
Bain found out, however, that investors are more optimistic about returns in South-east Asia in the next three to five years; the majority of them project an increase of 2 to 4 per cent.
The uncertainty that the tariffs threaten to bring will affect PE, because building models without knowing whether the underlying assumptions are going to be true makes deal-making difficult.
Trade sales are expected to remain the largest source of exits for South-east Asia PE in the coming years. Even as Trump’s tariffs roil markets, Varma noted that Asian corporates have strong balance sheets with adequate capital to acquire assets.
He said: “The question will be timing, because I might have those attractive assets, but given the uncertainty, maybe the corporate board doesn’t know what I should pay for that deal.”
Public markets are not what South-east Asia PEs bank on as exit avenues. Some PE funds were burnt in the public-market exits by Grab and PropertyGuru, the share prices of which tanked after listing.
Instead, trade sales and secondary sales are the top two most-likely exit routes. In the former, PEs’ shares are sold to companies; in the latter, PEs sell their shares to other funds.
For PEs in South-east Asia to kick-start the funding flywheel again, funds will need to give returns to investors, also known as distribution to paid-in capital (DPI), so money can be reinvested into new PE funds. But the market turmoil is hurting fundraising as well.
As investors adjust allocations in their portfolios, the tumbling public markets would cause private assets to suddenly take up a larger proportion of these portfolios. This is the “denominator effect”, which will cause funding that would have gone to PE be reallocated elsewhere in the name of balancing the portfolio.
“So the limiting factors today are DPI and the denominator effect,” said Varma.
