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SE Asia's private equity faces toughest exit conditions in 6 years: Bain report

In 2023, private equity firms with Southeast Asian portfolio companies faced significant challenges in generating returns and returning cash to their limited partners (LPs) due to a high-interest-rate environment. This resulted in the most depressed exit market since 2017, with exit deal value plummeting 60% to $2.8 billion and the number of exits dropping 70% from 21 in 2022 to just six. Despite these difficulties, Singapore remained an active deal-making hub.

The challenging exit environment is a major concern for LPs, as capital recycling is crucial for future investments. A survey highlighted "macroeconomic softness" as the primary challenge, with expectations of lower returns in the next 3-5 years. Additionally, holding periods for investments have lengthened, with fewer funds making timely exits compared to earlier years.

To navigate these hurdles, private equity firms are increasingly turning to secondary deals, such as partial exits and sales back to business founders or strategic investors, to create liquidity. These creative strategies are essential given the depressed valuations and limited full exit opportunities.

Local stock exchanges and operational improvements are emerging as alternative exit routes. Although initial public offerings (IPOs) have not been a primary exit strategy, there is potential for regional stock markets to mature and offer more liquidity. Additionally, investors are focusing on enhancing the operational efficiency of their portfolio companies to prepare for future exits.

Overall, deal value in Southeast Asia dropped 39% to $9 billion in 2023, while deal volume decreased by 24% compared to the previous five-year average.

Article by Pimfha Chan for DealStreetAsia. Read more here or in the PDF below.

SE Asia’s private equity faces toughest exit conditions in 6 years_ Bain report
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