South East Asian Private Equity Conference
14th October 2016
Grand Copthorne Waterfront Hotel, Singapore
Written by Adam Bloch & edited by Rebecca Ford
The South East Asian Private Equity Conference took place on the 14th October 2016 at the Grand Copthorne Waterfront Hotel in Singapore. It was a one-day event comprising of ten panel discussions covering topics from Exit Opportunities to Fintech and from Family Office to CEO Perspective. Speakers were welcomed from all the major players in the South East Asian private equity market, such as Quadria Capital, Anthem Asia, Rebright Partners, BANSEA, and many more.
The Opening Panel’s topic was the driving forces for private equity in South East Asia, and here we have brought together five key points to take away from the discussion.
1. The market is a highly complex one
The market can be characterized by a high degree of complexity as the industry in this region is relatively young, and the region is comprised of a high number of relatively small countries spread out over a large area, with a large and dense population. There is also a massive disparity between the richest and poorest in many of those countries, so good investments in good companies can be a means of effecting significant social change and provoking development. Nat Childres, a partner at Lensbridge Capital, took the stance that South East Asia is not one cohesive market, but rather a series of many smaller and highly interlinked, but separate, markets.
2. Direct & Co-Investments are on the increase
The panel agreed that they see an increase in co-investments and direct investments players, which creates more pricing tension. 2016 has been a very difficult and dramatic year on the global stage and it has created turbulence which has reverberated around the world and affected investor sentiment at every stage of the private equity process. Moderator Jon Bowden, a local partner at White & Case, considered whether turbulence is in fact now “the new normal”.
“It’s actually a series of very, very different markets, it’s not a single market.” – Nat Childres
3. Funds are shifting towards larger firms with fewer deals
The entire Southeast Asian region is a collection of many distinctive markets and the opportunities are very small compared to the size of the entire region. In addition, there has been a shift in funds, which means larger amounts of funds are consolidated with the large firms in the end of the market where the least amounts of deal flows are, which also impacts valuations. However, decent valuations still exist in the other end of the market (around 40-50m USD valuations) due to market deficiencies.
4. Investors are considering the environment
A long-term trend for the GPs is to find investments that ensure high returns and at the same time consider the environment and sustainability as a key aspect. Robert Kraybill indicated a nascent trend of investors trying to “place capital where it will positively do good for society”, while at the same time ensuring their financial return goals necessary for growth.
“LPs are increasing focus on environmental, social, and governance factors.” – Robert Kraybill
5. The market revolves around the relative stability of China
Steady volatility in the market due to uncertainty about China (depreciation of the Yaun, lower growth rates), makes Chinese LPs look outside of China to find investment opportunities in order to diversify their exposure. In addition, China’s economy is highly dependent upon the export of products from other countries to China for final assembly, which is seen to be a critical factor in terms of economic stability in the entire Southeast Asian region and therefore, the market must be careful with its valuations in the next 12 months.
Stay tuned to find out more about the upcoming SEAPEC official report!