Total deals in SE Asia to hit RM293b over next 5 years

A steady influx of new venture capital and PE participants has soared to record levels driven by interest in the tech sector


The investments ecosystem’s deal value in South-East Asia is expected to reach US$70 billion (RM292.93 billion) over the next five years, double the level reached in the previous five years as the digital economy attracts investor interest.

A Bain & Co study noted a steady influx of new venture capital and private-equity (PE) participants has soared to record levels driven by interest in the region’s tech sector, maturing bench of start-ups, strong existing momentum and healthy returns amid the creation of a single region trade block, as well as government initiatives that support venture capital and start-up centres.

Bain & Co South-East Asia senior advisor Suvir Varma said investment in the region over the past decade has been low, given its average economic growth of 7% a year, a burgeoning middle class and a growing pool of digital natives.

“By contrast, PE investment in this region hovered for years between roughly US$6 billion and US$9 billion.

“This meant it took longer to reach the tipping point, but having the right conditions in place for years helped speed the transition to this next phase of growth,” he said.

Bain & Co principal Alex Boulton said investing in the region is taking off, but new challenges such as intensifying competition and rising valuations will require investors to be careful.

“Uncertainty about global economic growth is rising, and new technologies are accelerating disruption across many industries, which could turn up the pressure in sectors such as healthcare and medical technology,” he said.

The company also identified four principles investors must follow to sustain the momentum.

First is to take an Asean perspective when evaluating deals and this includes taking into consideration how companies diversify across the region, grow faster and reduce the risk of relying on a single economy.

“Second is to identify the right talent for the biggest roles, followed by building commercial excellence to boost organic growth and lastly, to make the most of digital technologies,” Bain & Co stated.

Varma said the region’s investment ecosystem has reached a crucial juncture as it deepens and broadens.

“Skilled investors must raise their game to continue producing strong returns in what is still an evolving market,” he said.

The region’s Internet economy is on track to expand 37% in 2018 to US$72 billion and is projected to exceed US$240 billion by 2025, according to a joint research report by Google and Temasek Holdings Pte Ltd.

The economy is riding on the 350 million online users buying airline tickets and goods, and ordering rides and food via their smartphones across Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam.

Internet companies in the region have attracted a record amount of capital from venture capitalists, PE firms and corporate investors in 2018.