Southeast Asia has witnessed significantly massive transactions this year across mergers & acquisitions (M&A), venture capital (VC), private equity (PE), and initial public offerings (IPOs), reaching 1,800 transactions worth $280 billion USD, according to the Duff & Phelps Transaction Trail 2021 report. It represents a 230% increase from last year when the transaction value was only $84 billion USD.

Leading Malaysia and Indonesia, the VC trends in Singapore contributed $217 billion USD in total value to the region’s figures. Overall, $199 billion USD came from M & M&A and 29% from inbound transactions. Over 62% of the M&A value came from outbound acquisitions. The value of PE-VC deals was $5.15 billion USD and amounted to approximately 149 deals. Singapore dominated the PE-VC deals while Indonesia landed the most IPOs.

Assets under management (AUM) rose 17% in 2020 to $3.5 trillion USD, driven by net inflows and gains in value. Around 78% of the AUMs were obtained outside Singapore, with 34% from Asia-Pacific (APAC), excluding Singapore. A further 16% were from Europe, and 17% from North America. Funds invested in the APAC region grew to 16%, with Southeast Asia getting most of those investments at 33%.

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The 2021 VC trends in Southeast Asia showed that investors and companies were willing to use special purpose acquisition companies (SPACs) to close more deals. Investment funds and sponsors wanted to use SPACs to merge with foreign businesses to get listed on the US stock exchange.

Global interest from PE-VC players

According to the 2020 Singapore Asset Management Survey, asset managers overcame the challenges brought by the COVID-19 pandemic, switched to remote working, and tapped into the region’s growth opportunities. Last year, the digital transformation of Southeast Asia meant investors were likely to continue trying to capitalise on opportunities through PE-VC solutions.

The Monetary Authority of Singapore (MAS) conducted the survey using 1048 respondents from the financial sector, such as banks, financial advisers, finance and treasury centres, insurance companies, and others. A key takeaway was that sustainable finance was a priority for Singapore. Even though financial technology (fintech) startups are bringing much-needed innovations to the sector, MAS wants a vibrant financial ecosystem that embraces a low-carbon future.

Singapore’s position as a gateway hub for global investors and APAC encouraged the flow of capital in the region, with net inflows increasing by 15%. Furthermore, PE-VC funds are focused on sustainable investments as businesses embrace going green. Over the last five years, PE-VC assets under management in the country doubled.

Asset managers are also developing their companies’ green finance research capabilities. Others are appointing environment, social and governance (ESG) managers to lead their sustainable investing strategies in Singapore. In addition, there is a concerted effort to upskill and reskill workers to venture into new business streams.

Maintaining the financial ecosystem

PE-VC managers and investors are looking at integrating technology into their work to improve investment analysis and decision-making through artificial intelligence and machine-learning tools. Singapore’s over 1000 fintech businesses are creating solutions for investment, wealth management, and banking, which is becoming essential to maintaining the financial ecosystem.

The country has positioned itself as a premier derivatives market, with a daily trading volume of $640 billion USD. It is the largest bond listing exchange in Asia, growing by 50% in 5 years. It has 3000 bonds in 19 currencies from 45 countries, even introducing a green bond market in 2017. According to MAS, Singapore’s public equity capital market is also garnering interest, and public and private sector stakeholders have discussed measures, such as new listing pathways, to meet the needs of investors.

Moreover, the MAS survey highlights that the COVID-19 crisis is pushing companies to search for private credit solutions to address liquidity and solvency issues brought about by the pandemic response restrictions.

Singapore’s ecosystem showed resilience in 2020 despite suffering the worst full-year recession since independence. While vaccination is ongoing, new virus strains, such as the Omicron variant, continue affecting economic activities, resulting in uneven sector recoveries. For example, the logistics and tourism sectors will have to undergo further social distancing and lockdown measures to prevent the spread of the novel variants.

The current VC trends in Singapore bode well for the city-state as it sees more budding startups turning into unicorns due to investments or mergers and acquisitions. The digital shift creates tech startups in every sector, meaning investors have viable vehicles for channelling their capital and other resources.

As the 2021 VC trends in Southeast Asia show, more transactions and deals will occur in 2022 as investors and businesses adjust to a new post-pandemic way of living. The Duff & Phelps report believes that while there may not be a lot of record-breaking in the long term, there is still much momentum for investment in the region.