Asia-Focused Private Equity Investors Have $136 billion War Chest, Bain Says (Nikkel Asian Review)

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Asia­focused private equity investors have
$136 billion war chest, Bain says

“The wave of capital chasing deals of all sizes has kept competition at a fever
pitch, which in turn has pushed valuations into nosebleed territory,” Bain
said in its report.

It noted, for instance, that the average enterprise value for private equity
transactions in the Asia­Pacific region climbed to 17 times earnings before
interest, tax, depreciation and amortization in 2016 compared to 16.6 in
2015. This was well above the average EV to EBITDA multiple of around 10
for transactions in the U.S.

For Southeast Asia, the average EV to EBITDA multiple rose to 14 in 2016
from 11.2 in 2015.

Commenting on the Bain report, Terence Wong, CEO of Azure Capital, which
specializes in small and mid­cap listed companies, said that while there is
now less chatter about possible privatizations due to the market’s rally since
the start of the year, the interest in buyouts could return quickly as there are
still many companies trading at a discount to their peers in the same
industry.

As for investments in start­ups involved in so­called disruptive technologies,
Wong said the strong interest may not result in too many deals given the runup in the valuation of companies that are growing rapidly but have yet to
turn in a profit.

“I’ve seen the dotcom crash and there are similarities in that no one has
made money yet. It’s all paper profits from higher valuations.”

­­Nikkei Markets is a real­time financial news service for South East Asia’s
markets published by Nikkei NewsRise Asia Pte Ltd, a Nikkei and NewsRise
joint venture company. Nikkei Markets provides wide companies coverage in
the region, including the Nikkei’s Asia300 companies.