Written by Kane Wu
HONG KONG (Reuters) – Private equity mergers and acquisitions in Asia are at their lowest level in nearly a decade, data shows, with weaker deals in China and broader economic and geopolitical uncertainty weighing on sentiment. Looks like it's going to be a bad start.
PE-backed M&A in Asia totaled $13.5 billion from January to March 2019, down 32% year-on-year and the worst first quarter since 2015, according to preliminary data from LSEG. . In comparison, global PE collateralized transactions increased by 21% to $136 billion.
Asia's PE firms are sitting on record levels of dry powder, or unspent cash, but slowing economic growth, high interest rates, volatile markets and geopolitical tensions are dampening investment and exits. This is impacting fund managers' ability to raise new capital, consultancy Bain has announced. & Co. said in its 2024 Regional PE Report released on Monday.
“There will inevitably be exits,” said Sebastien Lamy, co-head of Tokyo-based Bain & Company's Asia-Pacific PE practice. “Longer holding periods and aging portfolios not only put pressure on returns, but also on the ability to refinance.”
PE fund exits in Asia through IPOs, trade sales and secondary buyouts fell 51% to $4.9 billion in the first quarter, the lowest level since the first three months of 2014, according to data provider Preqin. Ta.
China's stagnation is a key factor in the region's decline in PE-backed M&A, with such deals in the world's second-largest economy increasing in the first quarter as an economic slowdown and US-China tensions dampen investor appetite. LSEG data showed that it was almost halved.
Paul DiGiacomo, Hong Kong-based managing partner at investment bank BDA Partners, said most of the global PE community is “very cautious about investing” in China.
signs of recovery
Just $12.1 billion worth of capital was raised across 28 funds in the Asia-Pacific region in the first quarter, the lowest quarterly amount since January-March 2014, according to Preqin data. Over the past five years, there has been an average of 313 funds raised per quarter.
According to Preqin, unspent PE capital in Asia will reach $549 billion by June 2023, and the unrealized value of assets yet to be sold by funds will total $2.3 trillion, both record highs. was recorded.
But bankers and lawyers say there are signs of recovery and they expect it to pick up in the coming quarters.
Marcia Ellis, PE global co-chair at Hong Kong-based law firm Morrison Foerster, said mid-market transactions were occurring particularly in Southeast Asia. He said Middle East funds are also considering increasing their proportion of Chinese assets.
A number of funds are exploring the possibility of privatizing Hong Kong-listed companies.
“People are signing up to go through the process, and the process is moving a little faster,” BDA's DiGiacomo said. “Buyers' asset valuation expectations are becoming more aligned with sellers' expectations. We expect the number of M&A transactions to increase in 2024.”
(Reporting by Kane Wu in Hong Kong; Editing by Sumeet Chatterjee and Himani Sarkar)