Fitch Ratings expects signs of recovery in business activity in Indonesia in second half (2H) of 2020 following some easing of social distancing measures since end June - Photo by AC Ventures

JAKARTA (TheInsiderStories) – Two Indonesian venture capital (VC) companies Convergence Ventures and Agaeti Ventures has merged their businesses into AC Ventures. The new entity will continue the prior funds’ in early-stage firms, focused on tech companies as well as those serving micro, small, and medium-sized enterprises.

The new VC was formally established in the third quarter of 2019. Its partners include Adrian Li and Donald Wihardja from Convergence, Michael Soerijadji from Agaeti, and Pandu Sjahrir from Indies Capital. Based on the official statement, the new investment company aims to invest in up to 35 startups in Indonesia over the next three years.

In total, the two firms have made over 70 early-stage investments, including CoHive, Fore Coffee, Moka, Xendit, Akseleran, and among others. Soerijadji stated, along with this merger, they will have a strategic alliance with Indies Capital, which will ensure our ability to assist our entrepreneurs for growth or later stage capital as they create larger enterprises.

According to S&P Global Market Intelligence, deal volume dipped 4 percent in 2019 on the previous year. In total, 15,202 private equity (PE) and VC deals worth an aggregate US$477.22 billion were closed in 2019, down from 15,868 transactions, worth a combined $568.12 billion, recorded in 2018.

With a colossal $1.4 trillion, PE dry powder ready to be deployed, growing competition and soaring valuation multiples, investors are increasingly leveraging inorganic growth strategies and platform acquisitions to invest capital in a more efficient manner.

Looking at the core geographical focus for 2020, a clear picture emerges revealing that PE investors plan to deploy capital locally. When it comes to industry focus, information technology has been identified as the number one sector for investors (54 percent), healthcare (48 percent), and industrials (41 percent) follow closely behind to round up the top three sectors of interest.

In particular, PE investment into healthcare has enjoyed a sustained upward growth trajectory. According to S&P data, PE investment into the sector has grown steadily over the last five years, standing at $75 billion in 2019 compared to $44 billion in 2015, as investors seek non-cyclical, recession-proof assets in areas that are highly fragmented.

While, consumer discretionary appears to have lost momentum with only 30 percent of respondents planning to grow their exposure in the segment, as opposed to 33 percent in 2019.

A notable exception to this dynamic is in the APAC region, where respondents plan to focus heavily on opportunities in consumer discretionary (48 percent) and consumer staples (43 percent). What is more, both sectors overtook industrials (32 percent) as the sectors of preferred industry investment for the coming 12 months.

On the disinvestment front our data shows that there were 2,779 exit transactions recorded in 2019, a decline of 18 percent on the prior year. Although generally exit activity slowed down, public debuts gained traction in 2019.

Interestingly, at the end of 2018 survey participants indicated a growing interest in initial public offerings as an exit route, an expectation that came largely to fruition for Latin America and APAC. Both regions recorded a significant uptick in sponsor-backed IPOs compared to 2018.

Likely encouraged by positive momentum for public markets, APAC-based respondents stated that they would favour IPO over secondary sale as the second most preferred exit route after strategic merger and acquisition in the next 12 months, a view that was not shared by participants from other regions.

“This year will likely continue the trend of political and economic volatility and challenging market conditions that have coloured the investment landscape in recent years. As our survey results show, despite growing concerns over valuations and an increase in negative investment sentiment, capital continues to flow and PE firms are adjusting their activities to deploy the capital more effectively,” it said.

This means leveraging inorganic growth strategies and further deal making into defensive sectors such as Healthcare and IT. To comply with the ESG adoption process led by institutional investors, the PE industry needs to continue incorporating socially responsible investing practices and demonstrate the financial value therein.

by Linda Silaen, Email: