EY: APAC PE acquisitions getting larger

The value of private equity-backed deals in the Asia-Pacific region rose 77 percent in the second quarter of 2017, compared with the same period a year ago, according to EY’s Private Equity Capital Briefing report.

Firms have struck deals valued at $36.5 billion for targets in Asia in the second quarter of the year. By contrast, both the America and EMEA have seen declines in value — 6 percent and 11 percent respectively compared with last year. Across the three regions, private equity firms announced 672 deals valued at $147.6 billion in line with last year.

According to the report, firms are focusing on larger deals – particularly those valued between $1 billion and $3 billion, increased by 20 percent over last year – due to an abundance of capital as well as buying power of large institutions. Meanwhile deals below $250 million have declined 30 percent by value over the same period.

The $5.8 billion acquisition of footwear retailer Belle International by Hillhouse Capital Management and CDH Investments was the largest deal recorded in Asia, followed by the $4.3 billion take-private of Nord Anglia Education by Baring Private Equity Asia and Canada Pension Plan Investment Board. Other notable transactions include KKR’s $2.4 billion takeover of Vocus Telecom as well as its $1.5 billion acquisition of Hitachi Kokusai Electric.

Consumer goods, financial services and healthcare remain active sectors for private equity, collectively accounting for 40 percent of investment value this year.

The report also noted Chinese conglomerates are adopting financing strategies of private equity firms by using leverage and complex derivatives for overseas acquisitions. Aviation and shipping giant HNA Group, for example, has used share-backed financing and derivatives arranged by banks in order to rapidly build stakes in companies, including hotel firm Hilton Worldwide Holdings which it bought from Blackstone for more than $6 billion.