New De
lhi [India], March 26 [ANI]: Amid concerns of global slowdown and geo-political tensions, Bain and Company's 2024 Asia-Pacific Private Equity Report has put India and Southeast Asia as two best emerging markets for investment opportunities. The report has put Japan as one of the three developed markets for PE investments over next 12 months.
Based on Preqin's 2023 global LP survey, Japan ranked No. 3 among the top developed markets for PE investment opportunities, after the US and Western Europe (excluding the UK), and Australia-New Zealand ranked No. 6. Among emerging markets, India ranked No. 1 for investment opportunities, and Southeast Asia ranked No. 2.
The report however suggests investors pulling off and deal activity plunging for the second year in a row in 2023. Uncertainty in Asia Pacific equity market many investors have put deal making on hold in 2023 as well. Equity funds are worried about slowing economic growth across much of the region, high interest rates raising their cost, and volatility in stock markets. The funds are also worried about geo-political tensions and global conflicts.
Limited Partners firms have put new allocations largely on hold. But are optimistic about Japan among developed nations and India and Southeast Asia among emerging markets.
Economic uncertainty has affected investors in India as well and deal value fell by 41%, in the previous five years. For the first time since 2016, India generated no megadeals in the technology sector and only three in total, compared with a prior five-year average of seven.
India's 2023 megadeals included Temasek's $2 billion purchase of Manipal Health Enterprises; EQT and ChrysCapital's $1.1 billion acquisition of HDFC Credila Financial Services; and Brookfield Renewable and Global Power Synergy's $1.1 billion investment in Avaada Energy.
For the first time since 2008, Southeast Asia had no megadeals. The number of private equity deals and exits fell sharply in most markets amid ongoing uncertainty. Asia-Pacific PE funds raised just $100 billion in 2023, the lowest level in a decade.
Global GPs also were less active in India, where their share of deal value dropped 19% compared with the previous five-year average. However, deal making by other types of investors was roughly consistent with previous years.
Faced with a tough market, GPs developed new strategies to find buyers and improve exit value. Alternative asset classes such as infrastructure and private credit offer a growth opportunity for Asia-Pacific-focused funds.
This shift was mainly due to a sharp decline in the value of growth deals, which fell 50% from the prior five-year average. The total share of growth deals dipped only 13% compared with the previous five-year average.
Several market factors underpinned this trend, including the geographical mix of deals. The region produced fewer deals in Greater China, India, and Southeast Asia, markets where growth deals are dominant historically. The region also produced fewer technology deals, which typically are growth deals.
Exit value in 2023 declined across the region, with the exception of India, Japan, and South Korea. India's exit value rose 12% compared with the previous year, spurred predominantly by open market sales after a spike in IPOs in recent years. Korea's exit value increased slightly in 2023 but was down 41% compared with the previous five-year average.
Technology and industrial-related companies again dominated the exit market, increasing their share of the region's total exit value. IPOs in Greater China accounted for 42% of the technology sector's exit value, and most of those sales were semiconductor firms. Mega exits included Bain Capital's $2.7 billion sale of a 50% stake in Works Human Intelligence to GIC (Japan) and Tiger Global and Accel's $1.8 billion sales of their stakes in Indian e-commerce firm Flipkart to Walmart. IPOs in China also made up the bulk of industrial-related exits.