Private equity deals in Asia 2022 fell 44%. uncertainty in the future

The private equity market in the Asia-Pacific slumped last year — as investors’ appetite for risk declined in the face of inflation and geopolitical tensions, according to Bain & Company.

The global management and advisory firm said in a report on Tuesday that the total value of deals for the region fell 44% to $198 billion in 2022. This compares to $354 billion in 2021, analysts said, adding that nearly 70% of fund managers who Respondents expect the negative trend to continue until 2024.

Ongoing macro uncertainty along with rising costs and deteriorating company performance dampened investor sentiment, Bain said in his 2023 Asia Pacific Private Equity Report.

“Investors, sensing a new era of slow growth, soaring inflation, and increasing uncertainty, are taking a long time to reset their strategies, realizing that what worked in the past may not be the right approach for 2023 and beyond,” a group of authors from Private Equity Practices in Bain including Kiki Yang said in the report.

“If conditions — macroeconomic uncertainty, poor company performance, declining deal activity — persist that prevailed in 2022, valuations may continue to contract as fund managers adopt a wait-and-see attitude,” Bain wrote.

It said deal value in Greater China fell 53% as investors grappled with the country’s zero-Covid policy, leading to a pullback in the broader region. Payne said China and India contributed to a $35 billion decrease in total deal value of large growth deals for the year.

The company said that while internet and technology remained the largest investment sector in the Asia-Pacific region, it also saw a decline from the previous year, which marked the lowest level since 2017.

“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 transaction value in 2022 has fallen to 33% from 41% the year before,” the Bain authors wrote in the report.

“Traditional bastions of the Internet and technology deals – Greater China, India and Southeast Asia –
All of them saw a sharp decline,” Bain said, adding that the value of deals in the sector for Greater China markets fell 62% year-on-year.

In the technology sector, cloud services had the largest deal value, with consumer technology companies such as e-commerce and online services seeing deal values ​​drop nearly 70% year-over-year.

While macroeconomic conditions dampened investor sentiment for regionwide private equity deals, Bain saw a rise in the number of ESG-related deals.

“In the energy and natural resources sector, investments in utilities and renewable energy accounted for 60% of the deal value, reflecting the rise in environmental, social and corporate governance considerations as an investment priority,” Payne said.

The number of deals for utilities and renewable energy increased by 47% compared to last year, the report said, noting that the offshore wind power company Corio Generation of the Australian Macquarie Group secured an investment of about $1 billion from the investor. Ontario Teachers Pension Plan.

The public partners surveyed by Bain said they would continue to refine ESG investment in the following years.

Half of the general practitioners surveyed plan to significantly increase their efforts and focus on ESG in the next three to five years, up from 30% three [years] Payne said.