EY - Asia-Pacific private equity outlook 2014

Asia-Pacific private equity outlook 2014

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Investor confidence and overall optimism in Asia-Pacific are both high for the year ahead. More than three-quarters (76%) of respondents in this year’s survey expect private equity deal activity to increase in 2014.

A “virtuous circle” environment appears operative:

  • Growing economies are creating new business opportunities.
  • Regional business leaders are developing a more “friendly” view of private equity.
  • Robust credit markets are yielding more accessible capital.
“Corporate buyers are becoming less the foe and more the ‘peng you’ – Chinese for ‘friend’ – of private equity in Asia. Corporates are seen as less of a threat in competitive situations and more as potential buyers.”

— Robert Partridge, EY Asia-Pacific Private Equity Leader

 

Corporates seen as less of a threat to PE interests

EY - Significant challenges facing APAC private equity in 2014

Competition will likely persist between private and strategic acquirers. However, private equity will continue to grow as global buyout firms increase their presence and smaller firms capitalize on their knowledge of local business environments.

Only 40% of respondents cite cash-rich corporates as an obstacle, compared with 79% in last year’s survey.

 

Turning to trade sales to exit portfolios

EY - Asia-Pacific private equity 2013 highlights, exits

The listing hiatus in mainland China is lifted, but a significant deal pipeline has built up. This will lead to longer waiting periods for private equity investors looking to exit via IPO.

For many, trade sales to corporate buyers will be the preferred exit route.

 
“Reforms to the public listing process in mainland China will introduce new rules and expedite approvals, but we’ll have to wait another quarter before knowing if this new system is as effective as claimed.”

— Ringo Choi, EY Asia-Pacific IPO Leader

 

Buyouts becoming more prevalent in the region

EY - Asia-Pacific private equity 2013 highlights, buyouts

Buyouts have been largely confined to the region’s more mature markets, but 69% of respondents expect buyout deals to increase in 2014. Some respondents note that control acquisitions are gaining momentum in emerging Asian markets.

Secondary buyouts are also gaining traction (see second item in chart to right), a sign that the Asian private equity market is reaching a new level of maturity.

 

Institutional investors to increase capital inflows

EY - Inflows of institutional equity capital into Asia-Pacific in 2014

Consistent with last year’s survey, respondents agree that LP allocations will have a major role. More than three-quarters (77%) say LP allocations to Asia-Pacific private equity will increase, while 20% say they will remain steady.

 


For more information

EY - A maturing market: Asia-Pacific private equity outlook 2014

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What will be the most significant challenges facing private equity in the region over the next 12 months?

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What type of private equity deal do you expect to see comprise the bulk of activity in Asia-Pacific?

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From where do you expect most inflows of institutional equity capital into the Asia-Pacific over the next 12 months?

EY - Inflows of institutional equity capital into Asia-Pacific in 2014 ×