Asia private equity deals set for worst Q1 since 2015

NEW DELHI: Private equity-backed mergers and acquisitions in Asia have started the year on a low note, experiencing the worst beginning in almost ten years. Data indicates a decline in dealmaking in China and uncertainties in the economic and geopolitical landscape, affecting overall sentiment.
According to preliminary data from LSEG, PE-backed M&A in Asia amounted to $13.5 billion from January to March 19, a 32% drop compared to the same period last year, marking the weakest first quarter since 2015.In contrast, global PE-backed deals saw a 21% increase to $136 billion.
Consultancy Bain & Co highlighted that PE firms in Asia are facing challenges despite holding significant unspent cash. Factors like sluggish economic growth, market volatility, and geopolitical tensions have hindered their investments and exits. The ability of fund managers to raise new funds has also been impacted.
Sebastien Lamy, co-head of Bain & Co’s APAC PE practice, emphasized the necessity for exits amid prolonged holding periods and aging portfolios, noting the pressure on returns and fund-raising capability.
Data provider Preqin revealed a 51% decline in PE funds’ exits in Asia through IPOs, trade sales, or secondary buyouts, amounting to $4.9 billion in the first quarter, the lowest since 2014.
China’s economic slowdown and tensions with the U.S. significantly contributed to the downturn in regional PE-backed M&A, with deals in China nearly halving in the first quarter.
Despite the challenges, signs of recovery are emerging with expectations of improvement in the upcoming quarters. Middle-market deals are active, especially in Southeast Asia, while Middle Eastern funds are considering increasing their asset share in China.
There is a growing interest in potential privatisations of Hong Kong-listed companies, indicating a positive shift in the market sentiment. Investment professionals anticipate M&A volumes to rise in 2024 as asset valuations align between buyers and sellers.

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