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Private equity firms turn to Southeast Asia for growth

Private equity companies looking for investment opportunities in Southeast Asia cite favourable macro-economic conditions, such as the growing affluence of the middle class as driving business growth in the region.

SINGAPORE: A growing number of private equity firms are turning their attention to Southeast Asia, seeking to tap opportunities in the region. On Thursday (July 17), speakers at a seminar at the 4th Private Equity and Venture Forum organised by the Asian Venture Capital Journal, cited favourable macro-economic conditions, such as the growing affluence of the middle class, as business growth drivers in the region.

"Obviously for consumer businesses throughout the Asia-Pacific region - we think it’s exciting,” said Senior Partner and Head of Southeast Asia at Headland Capital Partners, Mr Paul C W Kang. “Benefiting from rising income, rising middle class - be it in Malaysia, Singapore as well and in Indonesia and at different levels - you have the ability to migrate from one to the other.

“So I think, for example, taking a Singapore-Malaysian business, then penetrating into Indonesia; or a food business that's very strong in Malaysia will go into Indonesia and also Myanmar, which is in a much earlier stage market. I think those sorts of themes are very exciting."

However, with growing attention on Singapore and Southeast Asia, the private equity scene in the region is also becoming increasingly competitive. Firms no longer look to be simple providers of capital and are aware of the need to add value to the companies they invest in.

One of the ways they are looking to provide solutions for is the issue of succession, especially for older Singapore companies. 

"Over the last 10 years, we've certainly seen an increase in that trend," said the Managing Director of Southern Capital Group, Mr Eugene Lai. "Obviously there are many firms that don't have that problem, but we've seen an increase in the number of firms where the founders have children, or the second generation have issues with the third generation who want to take over the business. 

“Also, I think as Singapore and other countries have matured or continue to mature, you find increasingly owners take the view on how do they maximise shareholder value; how do they maximise family wealth - as opposed to trying to keep the business within the family."

Private equity firms say that one challenge in seeking deals in the region is that Southeast Asia represents a group of nations rather than a single entity. This means that building networks in these markets is important to work effectively with local management teams and grow the business.

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