Asia private equity 2022 deals down 44%; uncertainty ahead

  • Total deal value for the region fell 44% from $354 billion in 2021 to $198 billion in 2022, Bain & Co said in a report Tuesday.
  • China and India accounted for a $35 billion drop in total deal value for major growth deals for the year, it said.

According to Bain & Company, the Asia-Pacific private equity market plummeted last year as investor risk appetite declined due to inflation and geopolitical tensions.

Total deal value for the region fell 44% to $198 billion by 2022, the global management and consulting firm said in a report Tuesday. That’s compared to $354 billion in 2021, the analysts said, adding that nearly 70% of fund managers surveyed expect the negative trend to continue into 2024.

Persistent macroeconomic uncertainties alongside rising costs and deteriorating corporate performance have dampened investor sentiment, Bain said in its 2023 Asia Pacific Private Equity Report.

Central Hong Kong and the IFC Tower seen from the Avenue of Stars in Tsim Sha Tsui. (Photo by Marc Fernandes/NurPhoto via Getty Images)

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“Investors, sensing a new era of slower growth, rising inflation and greater uncertainty, took the time to recalibrate their strategies, recognizing that what worked well in the past may not be the right approach for 2023 and beyond” , according to a group of authors. of Bain’s Private Equity practice, which includes Kiki Yang, said in the report.

“If the conditions – macroeconomic uncertainty, poor corporate performance and a decline in deal activity – prevailing in 2022 continue, valuations could fall further as fund managers take a wait-and-see approach,” Bain wrote.

The traditional strongholds for internet and technology deals – Greater China, India and Southeast Asia – all experienced sharp declines.

Asia Pacific Private Equity Report 2023

Bain and Co.

Greater China deal value fell 53% as investors grappled with the country’s zero-Covid policy, it said, leading to declines in the wider region. China and India accounted for a $35 billion drop in total deal value on major growth deals for the year, Bain said.

While internet and technology remained Asia-Pacific’s largest investment sector, it also saw a decline from the previous year, the lowest level since 2017, the company said.

“For more than a decade, the Internet and technology sector has attracted the largest share of private equity capital in the Asia-Pacific region. However, its share of deal value fell to 33% in 2022 from 41% the previous year,” said Bain. authors wrote in the report.

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“The traditional strongholds for Internet and technology deals – Greater China, India and Southeast Asia –
they’ve all experienced sharp declines,” Bain said, adding that industry deal value for larger Chinese markets fell 62% year over year.

Within the technology sector, cloud services had the largest deal value, with consumer technology companies such as e-commerce and online services seeing deal value drop by about 70% compared to a year ago.

While macroeconomic conditions dampened investor sentiment in private equity deals across the region, Bain saw an increase in environmental, social and corporate governance (ESG) deals.

“In the energy and natural resources sector, investments in utilities and renewables made up 60% of the deal value, reflecting the emergence of environmental, social and corporate governance considerations as an investment priority,” Bain said.

The number of utility and renewable energy deals rose 47% compared to a year ago, the report said, noting Corio Generation, the offshore wind business of Australia’s Macquarie Group, secured an investment of around $1 billion from investor Ontario Teachers’ Pension Plan.

General partners surveyed by Bain say they will continue to work on ESG-related investments for years to come.

“Half of the GPs we surveyed plan to significantly increase their efforts and focus on ESG over the next three to five years, up from 30% three [years] ago,” said Bain.


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