PE deals tumble in emerging markets

All BRIC countries have had a drop in PE activity YTD, though valuations are higher.

Private equity deal value and volume in the BRIC countries are down significantly this year to November and are unlikely to reach full year totals from 2012, according to Mergermarket data.

Deal value, excluding real estate and infrastructure, was down roughly 50 percent compared to full year 2012 totals in India ($1.55 billion) and Russia ($130 million). 

China transactions fell 30 percent to $5.5 billion. 

Brazil had the steepest plunge in value to $450 million from $3.2 billion last year.

Deal volumes decreased as well across all the BRIC countries. 

At the same time, public market valuations in BRIC countries, which tend to be correlated with private sector valuations, are up compared to the full year 2012, according to Thomson Reuters data.

The exception was China, which shows a 10 percent decline in average price-to-earnings to November, compared to full year 2012. 

However, David Brown, head of China private equity at PricewaterhouseCoopers, said the lower P/E ratio has not resulted in “noticeably lower pricing for China PE deals”.  

He cited wide variability between industry sectors, with baby milk companies trading 20x-30x earnings while the banking sector valuations are comparatively low. 

“I guess net/net, we are not hearing many of our PE clients talking about how reasonable China valuations are at the moment.”

 

  Brazil  Russia  India  China 
2012  $450 m $130 m $1.55 bn $5.5 bn
2013  $3.2 bn $210 m $2.85bn $7.8 bn

 

 

*Private Equity International features a special supplement on emerging markets in the December/January issue.