Global Courant
An editorial photo of the Japanese flag set against an economic trend graph and images related to the stock market, finance and digital technology.
Manassanant Pamai | Istock | Getty Images
According to management consultancy Bain & Company, the total value of private equity deals in the Asia-Pacific region fell last year to the lowest level since 2014. Fundraising fell to a decade low amid slowing growth, high interest rates and volatile public markets.
Japan, however, was an outlier: deal value rose 183% in 2023 from a year earlier, making it the largest private equity market in Asia-Pacific for the first time, according to Bain’s Asia-Pacific Private Equity Report 2024 that was published on Monday.
Japan is an attractive investment because of the large number of target companies with a “significant pool for performance improvements” and the corporate governance reform pressure on Japan Inc to divest non-core assets, Bain said.
Overall, deal value in the Asia-Pacific region fell by more than 23% to $147 billion from a year earlier. This is also 35% below the 2018-2022 average – a rate of decline consistent with the global slowdown – and almost 60% lower than the 2021 peak of $359 billion, Bain said.
Exits fell 26% to $101 billion in 2023 compared to a year ago – 40% of which came via IPOs. Greater China accounted for 89% of IPO exit value in Asia Pacific, with a vast majority of listings in Shanghai and Shenzhen. Excluding IPOs in Greater China, Asia Pacific’s total exit value was $65 billion.
Stock picks and investment trends from CNBC Pro:
“The outlook for exits in 2024 remains uncertain, but successful funds are not waiting for markets to recover. They are paving the way for sales to achieve their targeted returns by using strategy assessments to highlight the potential value of deals to buyers,” says Lachlan. McMurdo, co-author of the company’s annual report, said in a statement.
“This approach can reduce inventory of obsolete assets and return cash to limited partners through 2024, even if the overall exit market remains depressed,” he added.
Bain said many leading private equity funds have focused on exploring alternative asset classes such as infrastructure operations with medium to high returns, including renewable energy storage and data centers and airports.
Here are some highlights from the report:
Buyouts represented 48% of the total value of deals in Asia Pacific last year, surpassing the value of ‘growth deals’ involving companies that are expanding rapidly and often disrupting industries for the first time since 2017. Despite a shrinking pool of investors According to Bain, private equity returns are still more attractive than public markets over five-, 10- and 20-year horizons.
The timing of a recovery still remains unclear, Bain said, even though there were signs of some improvement toward the end of last year. As the recovery takes effect, disruptive technologies such as generative artificial intelligence will be among new areas that hold “great promise,” Bain added.
Japan, India and Southeast Asia are among the Asia-Pacific markets viewed favorably for private equity investment opportunities over the next 12 months, Bain said, citing Preqin’s 2023 investor survey.
