Private equity investment across Southeast Asia dropped sharply in Q3 as investors remained cautious amid valuation gaps and economic uncertainty, according to an EY-Parthenon report.
The report noted that only five transactions were completed during the period. The five deals were worth a combined $410 million, down 56% from $935.5 million across 10 transactions in the previous quarter.
This made Q3 one of the weakest quarters for private equity dealmaking in the region over the past two years.
The Philippines accounted for 40% of both deal volume and value, making it the region’s most active market.
Consumer businesses led transaction volume, while energy attracted the largest share of disclosed investment value.
There were no transactions exceeding $500 million during the quarter, highlighting the cautious approach of private equity firms as buyers and sellers struggled to agree on valuations.
Sellers continued to hold firm on pricing, supported by previous business performance and growth expectations, while buyers became more disciplined in their valuations amid macroeconomic uncertainty.
The resulting gap prolonged negotiations and weighed on deal activity, EY-Parthenon said in its Southeast Asia Private Equity Pulse for Q3 2026.
Exit activity also slowed from the previous quarter, with seven transactions generating $1.3 billion in proceeds, compared with 11 exits worth $4.2 billion in Q2.
However, exit volume rose 17% year on year, while proceeds increased 2.5 times.
Fundraising showed signs of improvement, with three funds raising a combined $825 million in Q3, compared with just one fund closing in the previous quarter.
Luke Pais, EY-Parthenon’s Asean private equity leader, said:
While Q3 2026 saw muted PE deployment in Southeast Asia, the market remains active, characterized by selective deployment, longer holding periods and a growing focus on driving performance within existing portfolios.
Private equity firms are also moving beyond broad transformation plans towards initiatives with measurable financial benefits, including pricing improvements, productivity gains, and practical applications of AI.
Despite the subdued dealmaking environment, Southeast Asia continues to offer opportunities through rising consumption, supply-chain diversification, and demand for capital to professionalise founder-owned and family businesses, Pais said.
The challenge for investors is converting these growth prospects into stronger financial returns through better management, operational efficiency, and technology adoption.
