Study: 2011 to be ‘banner year’ for Asian PE

Private equity fundraising for Asia from both local and foreign GPs increased 22% last year, while the average deal size in the region grew by 92%, according to a report from McKinsey and Company which believes the momentum will continue.

Private equity interest in Asia grew significantly in 2010 due in part to overall economic growth in the region and a pent up demand for restructuring from Asian companies, according to a new report from McKinsey and Company.

Private equity funds raised by both non-Asian general partners for their Asia-focused funds and by Asian GPs increased 22 percent in 2010, following a 62 percent decline the previous year, the report said.

The size of Asian funds also grew last year, as the number of $1 billion-plus funds in the region shot up 400 percent in 2010, following a 86 percent decline during the economic crisis.

In terms of deal flow, investments in Asia currently comprise 17 percent of global private equity activity, a drop from 25 percent in 2009, but a significant increase compared to pre-crisis levels of roughly 10 percent in 2007. Larger deals – those over $1 billion in size – grew from six in 2009 to ten in 2010.

The average deal size in Asia in 2010 increased by 92 percent, to $154.9 million.

“[W]e believe 2011 is going to be another banner year for private equity in the region,” managing partner at McKinsey Bruno Roy said in the report.

The number of $1 billion-plus funds in the region, which fell by 86 percent during the crisis, grew 400 percent in 2010, a sign of “renewed optimism among GPs”, the report said.

In China, RMB-denominated funds shot up dramatically, increasing 82 percent year-on-year to RMB 83.7 billion (€9.1 billion; $12.3 billion).

On the exit front, the value of initial public offerings grew 176 percent year-on-year to $84.3 billion. Trade sales, which totaled 29 billion, were up 75 percent.