Asia Pacific now accounts for one quarter of global private equity investment

24 April 2019 Consultancy.asia

Private equity investment in the Asia Pacific has grown from 5 percent of the global total in 2007 to a quarter of all investment last year, finds a Bain report, with $833 billion now under management in the region. 

The Asian Pacific region continues to draw considerable investment from global companies as well as domestic backing. According to an analysis from global strategy firm Bain & Company, international investors remain keen to pick up promising local targets as a means for market entry, access to local expertise, and localised products and services. Meanwhile, domestic companies continue to pursue their own inorganic growth strategies through acquisition.

In all, private equity investment in the region has increased from 5 percent of total investment in 2007 to 25 percent last year – with total assets under management by private equity firms now exceeding $880 billion in the region. While Greater China continues to draw the highest total funding, India has seen the highest increase in investment for 2018. Internet and tech companies meanwhile remain the most prominent targets, accounting for half of all deals last year.Asia-Pacific percentage of global private equity marketFollowing on from a significant surge the year previous, 2018 was again another massive year for M&A activity in the Asia Pacific region. The region has grown rapidly in terms of global market share of the total share of assets under management, and is highly competitive with financial players up against corporate interest – helping to push up multiples. Private equity holdings in the region are up 9% from a decade earlier.

Based on data from Preqin among other sources, the Bain report also shows that deal value broke records in the local private investment market in 2018, at $152 billion, up slightly on 2017. The increase reflects undiminished interest in technology and internet companies, the values of which boomed. Deal volumes also continued to run high, at around 1,200 investments – only slightly below the 2015 peak. Exists too hit a new record, at almost $150 billion raised, although exit volume fell sharply however, to around 400 deals.Asia-Pacific PE market rose to new highs in 2018In terms of sectors, internet companies continued to dominate the regional deal count for 2018, at around 30 percent of all deals, while technology deal counts accounted for around 20 percent. The combined total was up 6 percent on last year’s 44 percent, hitting an all-time high for the region. The health sector was in third place, followed by financial services and services more generally. One reason noted for the investment in these segments is their resilience to downturns, which is expected in the coming year.

Meanwhile, Greater China remains the most in demand location for investment. The region saw almost $100 billion invested in 2018, up 21 percent on 2017 and 64 percent on the 2013-2017 average. However, China is not the fastest growing, with India boasting a 79 percent increase relative to the 2013-2017 average, now totalling around $25 billion. Japan meanwhile saw investment activity plummet by 85 percent in 2018 – reflecting more a lack of sellers than a lack of demand for targets in the country.Recent average increase in private equity investment in Asian countriesThere are some worrying trends in the region, however. The continued uncertainty stemming from the US-China trade war could see investor confidence and interest wane. Higher interest rates could hit fundraising, which could see more risk adverse investment activity. And finally, Bain notes a considerable difference between top-funds and smaller players in terms of performance – highlighting a ‘winner takes all’ dynamic which could see market troubles in a downturn.

Commenting on the report, Usman Akhtar, a Jakarta-based partner and leader of Bain’s Private Equity practice for Southeast Asia, said; “Even though we see some potential dark clouds on the horizon, private equity investors have proven to be highly capable of outperforming other asset classes in prior downturns. However, the industry owes much of that to higher performing funds that raise the overall performance of the asset class.”


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