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M'sia warming up to private equity: survey

Publication Date : 07-02-2014


Malaysia is warming up to private equity as the industry continues to gain maturity across the Asia-Pacific, according to a survey by Ernst & Young (E&Y).

“Malaysia has seen a number of regional funds springing up as investors look to tap neighbouring markets,” said E&Y’s Malaysia Transactions Advisory Services Leader, George Koshy, in a statement.

“Malaysian companies are also warming up to private equity firms, as they look to move away from traditional funding channels and accumulating debt, and as initial public offering (IPO) opportunities remain elusive,” he added.

Koshy said in line with the growth of the private equity industry in the country, Malaysia must ensure that its regulations and guidelines surrounding foreign investors are relevant and effective.

“The Securities Commission’s recent revision of its Equity Guidelines is a good step forward in enhancing investor protection, and provides clarification on principles and requirements which will improve market efficiency and address the associated risks of investing in the country.”

E&Y, in a collaborative report with media company Mergermarket called A maturing market: Asia-Pacific private equity outlook 2014, said the private equity market in Asia-Pacific was “coming of age”.

E&Y co-leader for Asean private equity Purandar Rao assured that “exciting times were ahead” for private equity in Southeast Asia.

“Entrepreneurs and executives across Southeast Asia are increasingly aware of the value and wealth-creation opportunities that private equity can bring to their businesses. While deal volumes have been relatively flat, we expect this to pick up in 2014,” he was quoted as saying in the same statement.

Rao said the pace of private equity exits in Southeast Asia is expected to increase due to improving markets and “stretched holding periods” over the last few years.

“Trade sales to corporate buyers will continue to be the main exit strategy, but as markets get better, IPO activity will pick up,” he said.

According to E&Y, 76% of respondents in its survey said they had high expectations that private equity deal activities would increase in 2014, while 40% believe cash-rich corporates would be an obstacle to private equity in Asia-Pacific.

"Over 70% felt that the consumer sector would see the most private equity activity, while 53% said emphasis would be placed on energy, mining, and utilities. Institutional investor allocations are expected to increase, according to 77% of respondents,” it said.


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