Private equity firms, corporates, and other buyers in the Asia Pacific lapped up assets for a discount in the third quarter of 2020, making the most of the low valuations in the pandemic-hit year.
The APAC region saw the highest mergers & acquisitions (M&A) activity globally in July-September, according to a recent report by consultancy EY.
“On average, valuations have declined at least 20 per cent compared to the pre-COVID period,” Yew-Poh Mak, EY APAC Strategy and Transactions Leader told DealStreetAsia.
PE investments in APAC had slowed down significantly when the pandemic hit early this year, however, it started to pick up pace in the third quarter. “We’re seeing PEs bid actively — both Asia-based funds and also global funds,” added Gary A Nicholson, EY Asia-Pacific Transactions and Corporate Finance Leader.
In Q3, M&As in APAC were driven by domestic mergers and technology deals. Overall, APAC M&A deal value reached $392 billion in July-September. There were at least eight major PE deals in APAC in the three months — five acquisitions and three exits, showed EY data.
Some of the significant PE acquisitions include the 28.06 per cent stake acquisition of Mangrove 3 Ltd, the property management unit of China Evergrande Group by CITIC Capital Holdings and other investors for a valuation of $3 billion in August. In the same month, there was also the 100 per cent acquisition of Japan’s Takeda Consumer Healthcare by the global investment firm Blackstone Group for a $2.3 billion valuation.
PE acquisitions in APAC (Jan-Sept 2020)
|AirTrunk Operating Pty Ltd (88%)||Australia||Technology||1.8||Macquarie Infrastructure & Real Assets Pty Ltd|
|Property Portfolio (LG Twin Towers in Beijing, 100%)||China||RHC||1.1||GIC Pte Ltd.|
|Nichii Gakkan Co Ltd (100%)||Japan||Healthcare||1.5||Bain Capital|
|Jio Platforms Ltd (2.32%)||India||Telecom||1.5||KKR|
|Jio Platforms Ltd (2.32%)||India||Telecom||1.5||Vista Equity Partners LLC|
|Mangrove 3 Ltd (28.06%)||China||RHC||3||CITIC Capital Holdings Ltd along with other investors|
|Takeda Consumer Healthcare Co Ltd (100%)||Japan||Healthcare & Life Sciences||2.3||Blackstone Group|
|Property Portfolio (15 million sq ft property portfolio, 100%)|
CoWrks India Pvt Ltd
|India||RHC||1.8||Brookfield Asset Management Inc|
|Reliance Retail Ventures Ltd (2.13%)||India||Consumer||1.3||Silver Lake Group LLC|
|Shinhan Financial Group Co Ltd (7.58%)||South Korea||Financial Services||1||Affinity Equity Partners (HK) Ltd, Baring Private Equity Asia|
The big PE exits included the 100 per cent divestment of PT Softex Indonesia by CVC Capital Partners at a valuation of $1.2 billion, and the 100 per cent sale of BJ14, a data centre in the Shunyi District of Beijing, China by CITIC Private Equity Fund Management for $600 million.
PE exits in APAC (Jan-Sept 2020)
|Announcement date||Company||Headquarters||Sector||Value ($billion)||Divestor|
|January 2020||AirTrunk Operating Pty Ltd.||Sydney, Australia||Technology||1.8||Goldman Sachs, TPG Capital|
|April 2020||58.com Inc (90.08%)||China||Technology||7.8||Access Technology Ventures, Genesis Investment Management, Tencent Holdings, T. Rowe Price|
|May 2020||China Everbright Bank Co Ltd (8.66%)||China||Financial Services||2.4||China Huijin Investment Limited|
|May 2020||H-Line Shipping Co Ltd (58.06%)||South Korea||Mobility||1.4||AlpInvest Partners|
|May 2020||ESG Co Ltd (100%)|
ESG Cheongwon Co Ltd
|South Korea||Power & Utilities||0.7||Anchor Equity Partners|
|June 2020||Guangzhou Friendship Group Co Ltd (100%)||China||Consumer||0.6||Bank of China Ltd
China Investment Corp
Guangzhou Commerce Investment Holding Group Co Ltd
|June 2020||Canadian International School Pte Ltd (100%)||Singapore||Other sectors||0.5||HPEF Capital Partners Ltd
Southern Capital Group Pte Ltd
|September 2020||PT Softex Indonesia (100%)||Indonesia||Consumer||1.2||CVC Capital Partners|
|September 2020||Property Portfolio (BJ14, a data center in the Shunyi District of Beijing, 100%)||China||RHC||0.6||CITIC Private Equity Funds Management Co Ltd|
|September 2020||Modern Star Pty Ltd (Australian and New Zealand business , 100%)||Australia||Professional Services||0.4||Navis Capital Partners Limited|
EY noted 154 PE acquisitions in the first nine-months of 2020 and 56 PE exits in APAC. The total M&A value, including PE deals, in the first nine-months of 2020 was $708 billion, compared with $665 billion in the year-ago period — an increase of 6.4 per cent.
The active PE deals trend is expected to continue, mainly in the acquisitions side as the players are said to have raised around $300 billion of dry powder to be deployed in APAC in the next three to four years, said Mak.
“The private equity capital that has been raised over the last several years needs to be deployed…it’s chasing a home,” he added. Aside from the significant amount of dry powder, some global PE players will look to deploy more capital to not lose out on opportunities.
APAC’s most active sectors in terms of M&A deals will be technology, advanced manufacturing, and consumer goods. The technology sector was one of the first sectors to rebound in APAC, with deal volume returning to 2019 levels, and it continues to drive M&As as part of the transformation agenda across industries.
Throughout the first nine-months of 2020, the telecommunication or tech sector noted the main growth in deal activity with 19 per cent growth year-on-year, followed by life sciences or healthcare (9 per cent) as well as power and utilities (9 per cent).
Despite the decline due to COVID-19, M&A activity across APAC has been resilient throughout 2020 driven by industry and corporate reorganisation.
APAC’s M&A deals volume noted only 8 per cent decline in the first nine months of 2020 compared to 2019, while M&As in the US dropped 20 per cent and the European market was 15 per cent lower.
Overall, China’s deal volume rose to the 2019 monthly average level in March and April 2020 and has remained relatively steady for the second half of 2020. While mega domestic deals have driven Japan’s domestic M&A value to a 15-year high in Q3 2020, EY said.