Asia’s dealmakers spend big during pandemic, get little back

Private equity deal values in Asia-Pacific have doubled this year with a number of large transactions, according to data from EY.

Asia-Pacific dealmakers seem to have no issues deploying large amounts of capital during the pandemic; getting it back is another matter.

Private equity deal value in the region hit $95 billion for the first three quarters of 2020, more than double the $41 billion invested over the same period last year, according to EY’s PE Pulse Q3. This compares with a 45 percent decline in the Americas and a modest 2 percent rise in EMEA.

Exits are a different story. APAC exit value fell 59 percent YTD, versus just 11 percent and 12 percent for the Americas and EMEA respectively. Global exit value was down 17 percent year-on-year to $281 billion YTD.

“Asia shut down earlier, so anything done in the first quarter in terms of an exit was really left over from 2019, but whatever was in the pipeline at the start of 2020 was pretty much put on hold in the second quarter as no one was going to invest in that environment given the uncertainty,” Simon Kavanagh, a Hong Kong-based managing director at investment banking advisor BDA Partners, told Private Equity International.

“In the US and Europe they didn’t shut down in quite the same way so early; a lot of the processes they had at the start of 2020 continued and were able to get done. I think 2021 from a private equity exit point of view is going to be very strong, because there is this backlog of companies [in Asia] that have actually performed better than expected in 2020.”

Global deal value fell 12 percent year-on-year to $353 billion YTD and deal count was down 30 percent. Retail and utilities sectors experienced the biggest spike, with deal value climbing 89 percent and 83 percent respectively versus YTD 2019, while real estate and oil and gas each fell by more than 66 percent.

APAC’s totals were skewed in part by several mega-deals, including China Investment Corporation’s $34.9 billion acquisition of a minority stake in China Oil & Gas Pipeline Network Corporation, a new state-run company, in July; the $7.8 billion take-private of Chinese classifieds 58.com by General Atlantic, KKR and Warburg Pincus in June; and the $5.3 billion take-private of Chinese human resources business 51job by DCP Capital Partners in September.

“You’ve had them backing some of the take-privates where you’ve got large shareholders taking advantage of depressed valuations,” Kavanagh said.

“In the private equity universe there is still an awful lot of capital chasing a handful of very good companies, so when good opportunities come along you do get large consortium investments. There’s quite a lot of appetite for those, because there aren’t really that many big, billion-dollar deals for private equity investors in Asia.”