Bain & Co: ‘Asia private equity in a new era’

Asia’s improved macro climate and the pressure to deploy dry powder drove record fundraising, deal values and exit values for 2017.

Asian private equity achieved one of its best performances in 2017, signalling the start of a new era, according to the Bain & Company’s Asia-Pacific Private Equity Report 2018.

“Deals were larger, investment was broader and large global investors were more active than ever” in 2017.

The report noted that two key forces powered growth in 2017: investors’ growing confidence in the region as the macro climate improved and company owners’ greater overall acceptance of private equity funding.

Capital raised by Asia-Pacific focused funds reached $66 billion, 6 percent higher than the $62 billion raised in 2016. Pan-Asia funds also expanded fundraising activity, with KKR closing a record $9.3 billion for its third regional fund.

The report also found that LPs are continuing to pare down their relationships with managers, gravitating to larger, experienced funds with proven track records. In keeping with this trend, the total number of funds closed in 2017 dipped by about a third, while the average fund size grew by almost 65 percent.

Deal activity, meanwhile, reached its highest level ever last year. The private equity-backed deals climbed to $159 billion in 2017, up 41 percent over 2016 and 19 percent higher than the previous all-time high of $133 billion in 2014. Private equity investors are also pooling their investments together, which led to a surge of mega-deals ($1 billion or more) including the region’s largest deal in history – the $14.7 billion buyout of Toshiba Memory led by Bain Capital Private Equity and a consortium of investors including Japan’s Hoya Group, Apple, Dell, Kingston, Seagate, and SK Hynix.

In addition, company owners in Asia are turning to private equity and more of them are willing to cede control over their firms. The value of buyouts jumped 94 percent to $72 billion in 2017, and accounted for nearly half of total Asia-Pacific deal value.

The region also saw exit values jump 25 percent in 2017 to $115 billion, compared with the previous five-year average. More than 700 exits were recorded in 2017, up from the previous peak of 582 in 2015. The largest exit of 2017 was GIC’s $10.4 billion sale of Global Logistics Properties.

Trade sales remained the preferred exit channel of private equity firms, secondary sales were about 45 percent higher than the historical average, while IPO exits were in line with the average, Bain found.’