Private equity, the ASEAN way

The return of Southeast Asia on the private equity radar is largely driven by the recent surge of interest in Indonesia by the buyout firms, who are attracted by the country's ability to absorb large amounts of capital. Indeed, a number of Indonesian conglomerates are now going through a process of rationalization and are looking to sell off some local assets. Global and regional buyout funds, with their ability to invest $100 million-plus checks, well above what local competitors are able to muster, are ideal buyers.

Of course, there is now a successful group of indigenous Indonesian GPs and a crop of new investors following in their footsteps. As one prominent Southeast Asian GP recently told me, "It is very hard to go wrong if you invest in a good consumer-based business in Indonesia." The same investor then added that stringent portfolio management is critical to achieve a good end game.

Although Indonesia may be getting all the limelight, many successful investments and exits have been achieved in Singapore, Malaysia and Thailand (although the current political situation may require some caution). While not necessarily promising the scalability and potential growth of Indonesia's much larger consumer base, these markets have investment track records stretching back many years.

Finally, there are the more emerging markets of Vietnam, the Philippines, Cambodia and Myanmar. A couple of years ago, there was a sudden rise of Vietnam GPs – and a corresponding increase in funds raised – although the market has quieted down a bit. The other markets remain very under invested, even by Southeast Asia standards.

Of course, Southeast Asia is not without its risks. Unstable political situations, corruption, lack of management/corporate governance – the list is not a short one.

Exits are also relatively difficult, especially for GPs that prefer the IPO route. In the past institutional investors and multinationals have tended to ignore Southeast Asia in their growth plans, but this has started to change in recent years with Indonesia again leading the way. An influx of multinationals willing to pay top dollar for assets that allow them to boost exposure to emerging markets is welcome news for GPs.

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• Topics
• Exits
• LPs
• GPs
• Southeast Asia
• ICICI Venture Funds Management Company