Asia Pacific PE deal value down

Oksana Patron

29 March 2023

Private Equity (PE) deal value across the Asia Pacific region dropped 44% year-on-year to $198 billion in 2022, according to Bain & Company’s report.

The investor sentiment was dampened by a perfect storm seen as a combination of slower economic growth, declining consumer confidence, falling manufacturing output, high inflation and mounting global and regional uncertainties, the report found.

Greater China and Southeast Asia saw the greatest fall at 53% and 52%, respectively, with the former challenged by uncertainties relating to the zero-Covid policy, geopolitical tensions and tech regulatory crackdowns, and the latter faced with fewer growth deals.

At the same time, deal value in Australia-New Zealand (ANZ), Korea and Japan dropped 48%, 39% and 28%, respectively. Deal value in India declined 25%.

As far as deal types were concerned, growth deals continued to outpace buyouts in 2022, producing 54% of deal value, up from 50% in 2021. However, the total value of large growth deals above $200 million fell 45% in 2022 compared with the previous year.

Additionally, this trend was strengthened by investors’ shrinking appetite for risk and a drop in the value of technology companies on stock markets.

“In all markets where buyouts dominate, the rising cost of deal financing was a key factor depressing the number of buyouts as central banks tightened credit, interest rates rose, and liquidity shrank,” Tom Kidd, Bain & Company partner and co-author of the report, said.

When it comes to sector views, internet and tech companies continued to dominate and held the largest share of private equity capital in the Asia Pacific region. However, its share of deal value dipped to 33% in 2022, down from 41% in the previous year.

Advanced manufacturing and energy and resources sectors, on the other hand, recorded an increase in the number of deals in 2022, reflecting investors’ preference for companies with a low-risk profile that generate steady cash flow.

At the same time, government demand for private capital investment to develop and upgrade critical infrastructure including utilities, telecoms and transportation remained strong, especially in Southeast Asia and India.

Investments in utilities and renewables made up 60% of deal value in the energy and resources sector, reflecting the rise of environmental, social and governance (ESG) considerations as an investment priority.