Investors drive record activity in Asian private equity

The appetite for private equity opportunities in Asia-Pacific continues to grow, with the sector setting a new record in 2021. Economic growth in the region in the wake of Covid-19 has led to strong deals that have driven the investment value at $296 billion.

These were the main conclusions of Bath & Company‘s (Bain’s) 2022 Asia Pacific Private Equity Report.

“It has been a remarkable year for private equity in Asia, with the sector propelled to new heights, despite the impact of Covid and other macro headwinds. The region has shown a strong recovery and strong rise, each country delivering record results,” said Kiki Yang, co-head of Bain’s APAC private equity practice.

According to Lars Verheyen, Bain partner and co-author of the report, this speaks to the strength of the region and its place of growth, innovation and opportunity.

At the same time, the growth of private equity firms in Asia is increasing competition for attractive assets. As a result, Verheyen said it is becoming increasingly important to leverage an integrated due diligence approach that identifies opportunities for value creation as early as possible.

The uncertainty of the global economy is also placing increasing importance on investors as well as funds that continue to focus on a holistic approach to identifying the most viable path to value creation, Yang added. while paying attention to critical value drivers such as ESG.

Targeted transaction activity

Asia-Pacific’s share of global private equity assets under management increased to 30% by the end of 2021. At the same time, the amount of dry powder (committed but unallocated capital) in the region has reached a new high of more than $650 billion, the Bain Report said.

Deal activity in 2021 was strong in Japan, Southeast Asia and South Korea – more than doubling from 2020.

Meanwhile, Greater China and India accounted for 43% and 20% respectively of total deal value in Asia-Pacific But breaking the pattern of previous years, India grew faster than China in 2021, increasing its share of the overall market.

By sector, investor demand for internet and technology companies remained strong, contributing nearly half (48%) of total deal value.

Also according to Bain, releases rebounded in 2021, after two years of steep declines. Total exit value for Asia-Pacific more than doubled to $172 billion, driven by IPOs.

ESG: having an impact

General partners (GPs) in the region are also more aware of integrating ESG principles into their funds’ investment strategy, in line with efforts by governments and regulators to raise the bar for corporate transparency.

For example, Bain’s survey of GPs in Asia-Pacific shows that 57% plan to significantly increase their ESG efforts over the next three to five years, up from 41% in 2020 and 30% in 2019.

This is also fueled by the belief of limited partners that integrating ESG criteria into a fund’s investment strategy improves its performance.

“The importance of ESG for the private equity industry cannot be overstated, as it is now at the heart of most funds’ investment strategy, and rightly so,” explained Elsa Sit. , vice president of private equity at Bain and co-author of the report. .

“Moving forward, we suggest investors consider integrating ESG into the full investment lifecycle to better operate, invest and own.”