Welcome to our Recent Private Equity News Asia Section

Korea

Image Credits: Photos by Jason Cooper, Andre Benz, Raimond Klavins, Tianshu Liu, Ivan Bandura, Maud Beauregard, Mike Enerio, Avel Chuklanov, Eko Herwantoro, Ammie Ngo on Unsplash

Private Equity News Asia in September: Latest Developments and Insights

Private equity deals in Asia have been particularly active in September 2023, with several high-profile transactions taking place. One of the most notable deals was Japan Industrial Partners' successful $14 billion takeover bid for Toshiba, which has now been confirmed by the Japanese conglomerate.

Private equity firm Woori Private Equity Asset Management also made a significant acquisition in September, purchasing South Korea's Polaris Shipping for 600 billion won (around $447.5 million). The deal is expected to strengthen Woori's position in the shipping industry and further expand its portfolio.

In addition to these deals, private equity group EQT agreed to acquire Baring Private Equity Asia in a deal worth €6.8bn, adding €17.7bn to its assets under management and increasing its presence in Asia. The acquisition is expected to further strengthen EQT's position in the region and provide new opportunities for growth.

Market Overview of Private Equity in Asia

The Asia-Pacific private equity market has witnessed record growth in recent years. According to Bain & Company's 2023 Asia-Pacific Private Equity Report, deal value plunged 44% in 2022 to $198 billion, while exit value dropped 33% to $132 billion. However, returns rose to a new high of 15% median net internal rate of return, from 13.9% a year earlier, indicating that leading investors have been able to ride out the storm by identifying recession-proof sectors and top-performing companies.

Despite the challenges posed by the COVID-19 pandemic, Asia-Pacific private equity investors hardly noticed. The region's economies grew at a healthy clip, especially in the first half of 2022. Hong Kong-based Baring Private Equity Asia (BPEA) closed its eighth, and largest, pan-Asia fund at $11.2 billion in 2022, which exceeded its $8.5 billion target.

According to Bain & Company's 2021 Asia-Pacific Private Equity Survey, the biggest concern for GPs is high valuations. Following a dip in 2019, valuations rose slightly year-on-year, buoyed by vibrant stock markets and increasing competition. This has added to record levels of dry powder, which reached $441 billion in 2022, up from $426 billion in 2021.

The private equity market in Asia is diverse, with a range of sectors attracting investment. According to the 2022 Private Equity Survey by S&P Global, the most popular sectors for investment in Asia-Pacific are technology, healthcare, and consumer goods. The report also found that 43% of respondents were Private Equity Firms, 29% were Venture Capital firms, and 28% were firms doing both Private Equity and Venture Capital investments.

In conclusion, the Asia-Pacific private equity market is growing at a record pace, with investors able to identify recession-proof sectors and top-performing companies. Despite high valuations and increasing competition, the private equity market in Asia is diverse, with technology, healthcare, and consumer goods sectors attracting the most investment.

Impact of Covid-19 on Private Equity

The Covid-19 pandemic has caused significant market turbulence globally, with many industries experiencing a recession. Private equity firms have not been immune to the impact of the pandemic. However, the impact of Covid-19 on private equity has been mixed, with some sectors experiencing growth, while others have struggled.

According to a report by Bain & Company, deal activity in the private equity industry sank by half during the global financial crisis. However, several factors could ease the fall this time around. Credit markets have tightened up, but they have not frozen completely as they did during the global financial crisis. Leveraged loan issuance sank by almost 80% during that time.

The Asia-Pacific region has seen healthy growth in the private equity industry, despite the pandemic. According to a report by Bain & Company, Asia-Pacific private equity investors hardly noticed the impact of Covid-19 on the global economy for a second year running. The region's economies grew at a healthy clip, especially in the first half of the year.

Private equity investors have generated record deal value amid market turmoil, according to a report by White & Case LLP. However, M&A activity in the Asia-Pacific region stalled during the first half of 2020, with a 17% decrease in deal value year-on-year. Taiwan M&A activity, in particular, nearly halved.

The implications of Covid-19 on private equity and portfolio companies have been significant. According to a report by McKinsey & Company, the global PE portfolio declined by 4% as of July 31, up from a drop of about 20% as of March 31. Private equity firms have had to adapt to the changing market conditions brought about by the pandemic.

In conclusion, while the impact of Covid-19 on private equity has been mixed, the private equity industry has shown resilience in the face of market turbulence. Private equity firms have had to adapt to the changing market conditions brought about by the pandemic, but some sectors have experienced growth, while others have struggled.

Private Equity in Key Asian Economies

Private equity firms in Asia are increasingly focusing on emerging markets and fast-growing economies to find new investment opportunities. In this section, we will take a closer look at some of the key Asian economies that are attracting private equity investment.

China's Private Equity Landscape

China's private equity market has grown rapidly over the past decade, with many Chinese private equity firms now among the largest in the world. The greater China region, which includes Hong Kong and Taiwan, is home to some of the most active private equity investors in Asia.

One of the key trends in China's private equity market is the growing interest in technology and innovation. Many private equity firms are investing in Chinese start-ups that are developing cutting-edge technologies in areas such as artificial intelligence, big data, and robotics.

Private Equity in India

India is another key market for private equity firms in Asia. The country's fast-growing economy and large consumer market make it an attractive destination for investors. Private equity firms are particularly interested in sectors such as e-commerce, healthcare, and financial services.

One of the challenges for private equity firms in India is the country's complex regulatory environment. However, many firms are finding ways to navigate these challenges and are making significant investments in the country.

Singapore: A Hub for Private Equity

Singapore has established itself as a hub for private equity in Asia, thanks to its business-friendly environment and well-developed financial infrastructure. Many private equity firms have set up offices in Singapore to take advantage of its strategic location and favourable tax regime.

Singapore's private equity market is particularly active in sectors such as real estate, infrastructure, and healthcare. The country is also home to a growing number of venture capital firms that are investing in early-stage start-ups.

Emerging Markets: Indonesia and Vietnam

Indonesia and Vietnam are two of the fastest-growing economies in Southeast Asia, and both countries are attracting increasing amounts of private equity investment. Private equity firms are particularly interested in sectors such as consumer goods, healthcare, and infrastructure.

One of the challenges for private equity firms in these markets is the lack of transparency and regulatory uncertainty. However, many firms are finding ways to work around these challenges and are making significant investments in the region.

Private Equity in Japan

Japan's private equity market has traditionally been more conservative than other markets in Asia. However, in recent years, there has been a growing interest in private equity investment in the country.

Private equity firms in Japan are particularly interested in sectors such as healthcare, technology, and logistics. Many firms are also looking to invest in distressed assets, such as non-performing loans and bankrupt companies.

Hong Kong's Private Equity Market

Hong Kong has a well-established private equity market, with many of the world's largest private equity firms having a presence in the city. Hong Kong's strategic location and favourable tax regime make it an attractive destination for private equity investment in Asia.

One of the key trends in Hong Kong's private equity market is the growing interest in environmental, social, and governance (ESG) investing. Many private equity firms are looking to invest in companies that have strong ESG credentials and are committed to sustainable business practices.

Overall, private equity firms in Asia are increasingly looking to invest in emerging markets and fast-growing economies. While there are challenges associated with investing in these markets, the potential rewards are significant, and many firms are finding ways to navigate the challenges and make successful investments.

Key Players in Asian Private Equity

Private equity firms are an integral part of Asia's financial landscape, helping businesses grow and providing investors with attractive returns. Some of the key players in Asian private equity include KKR, Baring Private Equity Asia, TPG, Blackstone Group, and Carlyle Group.

KKR is a global investment firm that has been active in Asia since 2005. The firm has invested in a range of sectors, including healthcare, technology, and infrastructure. KKR has a strong presence in China, where it has invested in companies like China International Capital Corporation and Qingdao Haier.

Baring Private Equity Asia is another major player in Asian private equity. The firm has been investing in the region since 1997 and has offices in Hong Kong, Shanghai, Mumbai, Tokyo, and Singapore. Baring Private Equity Asia has invested in a range of sectors, including healthcare, education, and consumer goods.

TPG is a leading global private equity firm with a strong presence in Asia. The firm has invested in companies like China Grand Automotive Services and Shenzhen Development Bank. TPG has offices in Beijing, Hong Kong, Mumbai, Seoul, and Tokyo.

The Blackstone Group is one of the world's largest alternative asset managers and has been active in Asia since 2005. The firm has invested in a range of sectors, including real estate, infrastructure, and private equity. Blackstone has a strong presence in India, where it has invested in companies like Mphasis and Intelenet Global Services.

Carlyle Group is another major player in Asian private equity. The firm has invested in companies like China Pacific Insurance and China Huarong Asset Management. Carlyle has offices in Beijing, Hong Kong, Mumbai, Seoul, and Tokyo.

Overall, these private equity firms play a significant role in driving economic growth in Asia, providing capital to businesses and creating jobs.

Investment Sectors and Trends

Private equity firms in Asia have been actively investing in a variety of sectors and industries. Here are some of the most notable investment trends in recent years:

Technology and AI Investments

Technology and AI investments have been on the rise in Asia, with companies in sectors such as e-commerce, financial services, and transport receiving significant funding. Private equity firms are particularly interested in startups that offer innovative solutions to long-standing problems.

Healthcare: A Growing Investment Area

The healthcare sector has seen a surge in private equity investment in Asia in recent years. This is due to the growing demand for healthcare services in the region, as well as the increasing focus on health and wellness. Private equity firms are investing in a wide range of healthcare companies, including hospitals, clinics, and pharmaceutical and medical device manufacturers.

Investments in Consumer and Retail Sectors

Consumer and retail sectors have been a popular investment area for private equity firms in Asia. This is due to the region's growing middle class and increasing consumer spending power. Private equity firms are investing in a wide range of consumer and retail companies, including food and beverage, fashion, and beauty.

Private Equity in Media and Arts

Private equity firms are also investing in the media and arts sectors in Asia. This includes investments in film and television production companies, as well as art galleries and museums. Private equity firms are attracted to the potential for high returns in these sectors, as well as the opportunity to support the development of the arts and culture scene in Asia.

Investments in Manufacturing and Industrials

Manufacturing and industrials are another popular investment area for private equity firms in Asia. This includes investments in companies that produce a wide range of products, such as electronics, machinery, and chemicals. Private equity firms are attracted to the potential for high returns in these sectors, as well as the opportunity to support the growth of local manufacturing industries.

Energy and Climate Investments

Energy and climate investments have been gaining traction in Asia in recent years, as more companies look for ways to reduce their environmental impact. Private equity firms are investing in a wide range of companies in this sector, including renewable energy companies, energy storage companies, and companies that offer energy-efficient solutions.

Overall, private equity firms in Asia are investing in a diverse range of sectors and industries. While each sector has its own unique challenges and opportunities, private equity firms are confident in their ability to identify and invest in companies with strong growth potential.

Fundraising and Investment Strategies

Private equity fundraising for Asia investments has slowed down from last year's record pace, as investors contend with volatility and other challenges in global markets. According to a report by PitchBook, aggregated fundraising across the private investing universe was down 7.7% to $1.35 trillion in the 12 months leading up to September 30, 2022, as only funds focused on venture capital and real assets managed to surpass year-ago levels.

In this challenging environment, private equity (PE) investors in the Asia-Pacific region are looking for new fundraising and investment strategies. Bain & Company's Asia-Pacific Private Equity Report 2022 reveals that 62% of investors in their survey said cost and margin improvement was a very important part of deal theses in 2021, and nearly 40% said it was considerably more important than three years ago. Investors are also looking for opportunities to outpace market growth.

PE funds are also looking to diversify their sources of capital. Family offices are becoming an increasingly important source of capital for PE funds in Asia. According to a report by the Financial Times, Chinese private equity funds are targeting record fundraising this year as global investors boost their exposure to the country despite deep tensions with the US and heightened regulatory scrutiny.

Investors are also looking for new investment strategies that can deliver superior returns. Buyouts have been a popular investment strategy for PE firms in Asia, but there is growing interest in other sectors such as healthcare, technology, and renewable energy.

Finally, there is growing concern about the amount of dry powder that PE firms are sitting on. According to Bain & Company's Asia-Pacific Private Equity 2021 report, the region's PE firms had $430 billion in dry powder at the end of 2020, up from $346 billion in 2019. Investors are looking for ways to put this capital to work, but they are also wary of overpaying for assets in a competitive market.

Overall, PE investors in Asia are navigating a challenging fundraising and investment environment. They are looking for new strategies to generate returns and diversify their sources of capital while managing the risks associated with a competitive market and growing levels of dry powder.

Deal Activity and Valuations

Private equity deal activity in the Asia-Pacific region suffered a significant downturn in 2022, with the deal value plunging by 44% to $198 billion, according to Bain & Company's Asia-Pacific Private Equity Report 2023. This marks a turning point for the industry, with general partners retrenching from the region in the past 12 months. However, despite the drop in deal value, returns rose to a new high of 15% median net internal rate of return, from 13.9% a year earlier.

Investors are now looking for opportunities to outpace market growth, with 62% of investors in Bain & Company's 2022 Asia-Pacific Private Equity Report survey indicating that cost and margin improvement was a very important part of deal theses in 2021. Nearly 40% of investors said it was considerably more important than three years ago.

In terms of deal multiples, valuations, and megadeals, there were notable changes in the Asia-Pacific private equity market in 2022. The report found that the median EV/EBITDA multiple for deals in the region was 11.3x, down from 12.3x in 2021. Meanwhile, the median enterprise value for deals was $109 million, down from $124 million in 2021.

Despite the drop in deal volume, there were still some notable megadeals in the Asia-Pacific region in 2022. For example, Japan Industrial Partners' $14 billion takeover bid for Toshiba was successful, while Woori Private Equity Asset Management acquired South Korea's Polaris Shipping for 600 billion won (around $447.5 million).

Overall, while deal activity in the Asia-Pacific region has slowed down, there are still opportunities for savvy investors to identify recession-proof sectors and top-performing companies to generate strong returns.

Exits and Returns

Private equity exits and returns in Asia-Pacific have been affected by the COVID-19 pandemic. According to the Asia-Pacific Private Equity Report 2023, exit value dropped 33% to $132 billion in 2022, following a 44% plunge in deal value to $198 billion. Despite these challenges, returns rose to a new high of 15% median net internal rate of return, up from 13.9% a year earlier.

The report also notes that public markets have been an attractive exit route for private equity investors in the region. In 2022, the number of IPOs increased by 22% year-on-year, with a total deal value of $34 billion. This trend is expected to continue in the coming years, as more companies in the region look to go public.

Secondary sales have also been a popular exit route for private equity investors in Asia-Pacific. In 2022, secondary sales accounted for 27% of all exits, up from 22% in 2021. This trend is expected to continue, as private equity firms look to sell their stakes in portfolio companies to other investors.

Private equity firms in Asia-Pacific are also focused on improving returns by driving cost and margin improvements in their portfolio companies. According to the Asia-Pacific Private Equity Report 2022, 62% of investors said cost and margin improvement was a very important part of deal theses in 2021, and nearly 40% said it was considerably more important than three years ago.

Overall, private equity exits and returns in Asia-Pacific have been impacted by the COVID-19 pandemic, but the region remains an attractive destination for private equity investment. Private equity firms are focusing on improving returns through cost and margin improvements, and are leveraging public markets and secondary sales as exit routes for their portfolio companies.

Challenges and Opportunities

Private Equity in Asia has been growing rapidly in recent years. However, the sector has also been facing several challenges that need to be addressed.

Geopolitical Tensions

Geopolitical tensions have been a major challenge for Private Equity in Asia. The ongoing trade war between the US and China has created a lot of uncertainty in the region. This has made it difficult for investors to make long-term investment decisions. In addition, the tensions between China and Taiwan, and China and Hong Kong, have also created a lot of uncertainty in the region.

Sustainability

Sustainability is becoming increasingly important for Private Equity investors in Asia. Environmental, Social, and Governance (ESG) factors are now being considered by investors when making investment decisions. This is because investors are becoming more aware of the impact that their investments have on the environment and society. Companies that are not sustainable may find it difficult to attract investment in the future.

Attractive Investment Opportunities

Despite the challenges, Private Equity in Asia still presents attractive investment opportunities. The region has a large and growing middle class, which is driving demand for consumer goods and services. In addition, the region is home to many innovative and fast-growing companies, particularly in the technology sector.

Macroeconomic Climate

The macroeconomic climate in Asia is also presenting challenges and opportunities for Private Equity investors. The region has been experiencing strong economic growth in recent years, which has created many investment opportunities. However, the region is also facing several economic challenges, including rising inflation and a slowdown in the Chinese economy.

In conclusion, Private Equity in Asia is facing several challenges, including geopolitical tensions and sustainability issues. However, the region still presents attractive investment opportunities, particularly in the consumer goods and technology sectors. Investors need to carefully consider the macroeconomic climate when making investment decisions in the region.

Conclusion

Private equity in Asia-Pacific has faced a challenging year, with deal value and fundraising activities declining. Nevertheless, returns have risen to a new high, indicating that the industry remains attractive to investors.

According to Bain & Company's Asia-Pacific Private Equity Report 2023, deal value plunged 44% in 2022 to $198 billion, while exit value dropped 33% to $132 billion. However, returns rose to a new high of 15% median net internal rate of return, from 13.9% a year earlier.

Despite the challenges, private equity firms remain optimistic about the region's long-term potential. As Bain & Company notes in its Asia-Pacific Private Equity 2021 report, Asia-Pacific's economic growth and demographic trends make it an attractive market for private equity investment.

Private equity firms are also looking beyond traditional sectors, such as consumer goods and financial services, to find new opportunities in emerging industries. For example, Moonfare's Private Equity in Asia: Opportunities in 2022 and Beyond report highlights the growth potential of sectors such as healthcare, technology, and sustainability.

In summary, while the private equity industry in Asia-Pacific has faced challenges in recent years, it remains an attractive market for investors. Firms that are able to adapt to changing market conditions and identify emerging opportunities are likely to succeed in the long term.

Overview of The Asian Private Equity Market

The private equity industry in Asia is booming and 2022, private equity firms in Asia raised a record $288 billion.

This is up from $200 billion in 2021.

This investment was deployed in a wide range of sectors, including technology, healthcare, consumer, and industrials.

There are a number of factors that are driving the growth of the private equity industry in Asia.

One factor is the increasing wealth of Asian investors.

As more and more people in Asia become wealthy, they are looking for alternative investment opportunities.

Another factor is the growing number of attractive investment opportunities in Asia.

The region is home to a number of fast-growing economies, such as China and India.

These economies are generating a large number of new businesses, which are attractive to private equity investors.

The growth of the private equity industry in Asia is also being supported by the increasing availability of debt financing in Asia.

In the past, private equity firms in Asia had to rely on their own capital to fund their investments.

However, in recent years, there has been a growing number of debt financing options available to asian private equity firms.

This has made it easier for private equity firms to acquire and grow businesses.

Therefore, dispite the recent downturn, the growth of the private equity industry in Asia is expected to continue.