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Asia-Pacific Private Equity Deal Values Hit Record High - Bain & Co

The findings are of value because private equity is a major asset class holding for wealth management clients, whether at private banks, external asset managers or family offices.
General partners running private equity firms in the Asia-Pacific
region are most concerned about high valuations, intensifying
competition and the disruption caused by COVID-19, according to a
study by the consultancy, Bain & Co.
Deal values rose across Asia last year as investors piled back
into the fray after the early-2020 hit caused by the pandemic.
Deal value reached a record high of $185 billion, rising by 19
per cent from 2019 and 23 per cent over the previous five-year
average, the firm said. Bain spoke to 162 senior market
practitioners. Some 63 per cent of general partners said
that higher multiples were one of their top concerns. Some 40 per
cent of GPs said valuations rose last year.
“It’s been a rollercoaster year for private equity in Asia,” Kiki
Yang, co-head of Bain & Company’s APAC Private Equity practice,
said. “But while deal-making ended the year on a high, COVID-19
has not gone away, and building portfolio resilience will be a
crucial skill for leading investors.”
To put the region into context, Asia accounts for 28 per
cent of the global PE market, the report said.
Private equity is a major asset class holding for wealth
management clients, whether at private banks, external asset
managers or family offices. PE typically offers superior yields
to compensate for lower liquidity – a big draw at a time of
globally low interest rates.
China’s total deal value rose to $97 billion, a rise of 42 per
cent from 2019 and 22 per cent higher than the previous five-year
average. Meanwhile, India continued to increase its share of deal
activity in the region. Deal value rose to $38 billion, up by 64
per cent over the prior five-year period. The growth came partly
from an extraordinary series of 10 private equity investments
totalling almost $10 billion in technology multinational Jio
Platforms, and seven investments in Reliance Retail.
While deal value grew in Japan and Australia/New Zealand from the
previous five-year averages, South Korea’s deal activity was on
par with previous years. Travel restrictions hit deal activity
significantly in Southeast Asia, where deal value fell by 16 per
cent over the previous five-year average, the report
said.
Following a “breathtaking” fall to a 10-year low in 2019, the
number of exits was flat last year, it said. Exit deal value
totalled $70 billion, down by 24 per cent year-on-year and 40 per
cent from the previous five-year average, as PE managers awaited
better times fo selling portfolio companies. Of the GPs Bain
surveyed, more than 70 per cent said the exit environment was
more challenging than in 2019, pointing to COVID-19 as the
principal cause for a weak exit environment.
However, a bright spot was the route of initial public offerings,
the report said. IPOs dominated the exit market, making up more
than 60 per cent of exits by value, almost double the previous
five-year average. China accounted for 86 per cent of the
region’s IPOs and the majority were healthcare and technology
companies.
The value of the companies held in PE portfolios, or unrealised
value, continued to climb, reaching $1.04 trillion, rising by 33
per cent year-on-year.
Fundraising slowed in 2020, overshadowed by a poor exit
environment. Funds focused on Asia-Pacific raised $90 billion,
down by 32 per cent year-on-year, 53 per cent from the prior
five-year average, and 64 per cent from the peak year of
2017.