Despite COVID-19, Asia Pacific PE deal value hits record high in 2020: Bain

Photo: REUTERS/Beawiharta

Despite the global COVID-19 disruption, private equity investors in the Asia-Pacific region generated a record high deal value of $185 billion last year, according to the latest report by global advisory firm Bain & Co.

It was a startling year of contrasts for the region’s PE market, according to Bain, as lockdowns precipitated a plunge in first-quarter activity. Investors, however, quickly jumped back into the market in the second quarter, with dealmaking reaching its peak in the fourth to boost the region’s deal value to a record high.

Deals in China, India, and Japan lifted deal value across the region to $185 billion, up 19 per cent from 2019 and 23 per cent over the previous five-year average. The robust dealmaking helped Asia-Pacific assets under management rise to 28 per cent of the global PE market, the report noted.

China’s total deal value rose to $97 billion, a 42-per cent increase from 2019 and 22 per cent higher than the previous five-year average. The 2020 growth in China was a sharp rebound from a 35 per cent drop in 2019.

“China was the first country to lock down and the first to recover. As soon as the pandemic started to ease, the country’s general partners (GPs) quickly got back to work closing deals that they had put on hold,” the Bain report said.

Asia Pacific PE Deals Bain

India, on the other hand, saw its deal value rise to $38 billion, a 64 per cent increase over the prior five-year period. Bain said a series of PE deals in the second quarter totaling almost $10 billion in Jio Platforms helped revive the market.

Japan and Australia-New Zealand also posted growth in deal value from the previous five-year averages. In Southeast Asia, however, the picture is not all that rosy. According to the report, deal value in the region declined 16 per cent over the previous five-year average, pulled down by travel restrictions.

And while Asia Pacific’s PE deal value reached a record high during the pandemic year, exits and fundraising remained challenging. Secondary and trade exits dropped to a near 10-year low while fundraising activities declined for the third consecutive year.

Asia Pacific PE Deals Bain

PE exit value in the region dropped 24 per cent year-on-year and 40 per cent from the previous five-year average to $70 billion last year as PE managers held on to their portfolio companies pending better market conditions.

The poor exit environment also forced a slowdown in fundraising. According to the report, Asia-Pacific-focused funds raised just $90 billion last year, down 32% year-on-year, 53 per cent from the prior five-year average, and 64 per cent from the peak year of 2017.

Survey respondents, which include 162 senior market practitioners, flagged high valuations, increased competition, and the ongoing impact of COVID-19 as the top concerns for GPs.

The increased caution among limited partners (LPs), travel restrictions, and unfavorable market conditions were also among the factors that hampered efforts to launch new funds in 2020.

“It’s been a rollercoaster year for private equity in Asia,” said Kiki Yang, co-head of Bain & Company’s APAC Private Equity practice. “But while dealmaking ended the year on a high, COVID-19 has not gone away, and building portfolio resilience will be a crucial skill for leading investors.”

For this year though, GPs are more optimistic. While they are concerned about the effects of the global pandemic, about 80 per cent expect the macroeconmic climate to be more favorable this year, given the approval of promising vaccines last December.

Bain expects deal value likely to continue at a healthy clip as the dearth of exits in 2020 and “mounting stores of unspent capital” increase pressure on GPs to trim portfolios and find new investments. Several large deals that were delayed in 2020 are likely to close this year.

Andrea Campagnoli, a partner in Bain & Co’s PE practice based in Singapore, said Asia Pacific has been “an exciting and dynamic region” for any global PE fund.

“Improving macroeconomic conditions coupled with many exciting investment opportunities, especially in digitally advanced sectors, will continue to draw strong interest from investors,” she added.

The Asia Pacific PE market as defined for the Bain report includes investments and exits with an announced value of more than $10 million and those that have closed and at the agreement-in-principle or definitive agreement stage.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.