Private Equity Surges in Southeast Asia

Six ASEAN-focused funds have raised $500 million in the first half of 2019.

Fundraising for the private equity and venture capital industry in Southeast Asia has hit new highs e first half of the year, according to financial data and information provider Preqin.

A record 17 venture capital funds focused on the Association of Southeast Asian Nations (ASEAN) region raised $900 million in 2018. While buyout and growth funds have already matched 2018’s total, according to a report from Preqin.

“Southeast Asia presents a wealth of opportunities to private equity and venture capital investors, and clearly many of them are starting to take an increased interest in the region,” Ee Fai Kam, Preqin’s head of Asia research said in a release. “With several large cities on the global stage, and governments that are encouraging entrepreneurship and technological innovation, these countries make fertile ground for venture capital investment in particular.”

The fractured regulatory environment can create a challenge for investors. Political uncertainty in some areas may be dampening larger scale buyout investment.

According to Preqin, there are another 70 ASEAN-focused funds currently in market targeting a total of $8.5 billion in capital. A significant portion of the interest in the region is coming from foreign investors. 84% of the known investors in ASEAN-focused funds are based outside the region.

According to the report, venture capital is one of the key strategies for investors in the ASEAN region as investors remain optimistic, and fundraising has been going well despite the global economic volatility.

“Investors showed a strong appetite for early stage start-up funds in particular, whose share of the total number of funds raised increased from 21% in 2017 to 29% in 2018,” the report noted. The uptick added to the aggregate value of series B and C financings which increased to $1 billion from $600 million over the same period.

There have been 222 deals in ASEAN markets worth $3.4 billion since the beginning of 2019, compared with 220 deals worth $3.1 billion for the first half of 2018. Singapore remains the regional hub for deals, generating $2.4 billion in venture capital deals so far in 2019, which is up sharply from the $1.3 billion generated during the first half of last year. The report cited recent large deals in the venture capital arena, including China-based social media platform YY Inc.’s $1.5 billion acquisition of Singapore-based Bigo Technology in March.

ASEAN-focused buyout and growth funds have together collected $800 million as of June, matching the total amount raised in all of 2018.However, the report notes that fundraising is down from its peak of $6.1 billion in 2015. As of June 2019, there are 19 ASEAN-focused buyout and growth funds in market, collectively seeking $3.6 billion in investor commitments.

There have also been 20 private equity-backed buyout deals worth an aggregate $400 million since the beginning of 2019, and Preqin said year-end figures are looking like they’ll be considerably lower than last year’s $3.6 billion in total deal value.

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