Bain: GDP doesn’t indicate private equity capacity

Bain makes its cases by comparing South Africa and Russia. The former has a GDP of $400 billion and a private equity penetration of 0.3%, while the latter has a GDP of more than $1.5 trillion but private equity penetration is negligible. Penetration is defined as PE deal value since 2007 divided by total GDP in 2011.

The key differential, Bain says in its 2012 Global Private Equity Report, is that South Africa almost matches Russia in terms of companies with annual revenues in excess of $250 million. It also boasts a more transparent and reliable investment environment.

Bain also highlights depth of management talent, corporate governance and transparency, a creative entrepreneurial culture and investor influence on companies as indicators of a country's commercial maturity and therefore its receptiveness to private equity.

In this context, the consulting firm argues that certain markets with the most potential are currently among the most neglected by PE investors. It notes that Malaysia outranks China in IESE Business School's Global Venture Capital and Private Equity Country Attractiveness Index, while Thailand is within striking distance of India.

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