Study: Southeast Asia exits soar

PE exits of portfolio companies in Southeast Asia last year more than doubled in terms of deal value, a trend expected to continue, according to a Bain & Company report.

In 2012, private equity exit value in Southeast Asia jumped 173 percent year-on-year to $15.6 billion from $5.7 billion, according to a recent report by Bain & Company and the Singapore Venture Capital Association. 

The figures give comfort to the many investors and private equity firms globally that are moving into the region to invest, given that dealflow in Southeast Asia dropped 16 percent to $4.9 billion in 2012 compared to $6 billion in 2011.

The report explained that Southeast Asia remains in a holding pattern as firms struggle with intense competition, lack of attractive companies and questionable standards of corporate governance, all of which contribute to the disappointing number of deals closed last year.

Competition is fierce, particularly in Indonesia, with exclusive deals almost non-existent. During 2012, about 85 percent of deals had at least one or two competitive bidders, up from just 60 percent facing competition for deals in 2011. 

Around 20 percent of deals had three or more rival bids.

Nevertheless, the burst of exits showed a “viable private equity cycle in Southeast Asia”, with sellers’ expectations settling down to reasonable levels. 

Jakarta is serving up a number of 
exit opportunities, but competition for deals
is increasing, according to Bain & Co.

Five years ago, more than 70 percent of investors were demanding returns of greater than 20 percent, while this year two-thirds of the respondents were looking for something closer to 16 percent, according to the report. 

Yet exits have continued during 2013, with two major sales by private equity firms being completed in Indonesia. TPG Capital and its Indonesian partner Northstar Pacific Partners sold 24 percent of Indonesian commercial bank Bank Tabungan Pensiunan Nasional (BTPN) in May to Japanese Sumitomo Mitsui Banking Corporation, PEI reported earlier. The parties also have an acquisition pending approval from Indonesian regulatory authorities for another 15.74 percent of BTPN to make a total stake of 40 percent. The combined deals are worth $1.52 billion and represent a 7x return.

CVC Asia Pacific had some similar success recently, but on the Indonesian stock market. In a long-awaited partial exit, the Asian arm of European buyout firm CVC Capital Partners sold 40 percent of Indonesia-based Matahari Department Stores in March. 

The deal was worth $1.3 billion, having priced the 1.17 billion shares divested at Indonesian Rp 10,850 (€0.86; $1.12) per share, with CVC gaining an estimated 7x-8x return, PEI reported earlier. 

Warburg Pincus, The Carlyle Group, The Riverside Company and Kohlberg Kravis Roberts are also among the large number of private equity firms targeting Southeast Asia, some for the first time.