Asia-Pacific private equity outlook 2013

Overview and top 9 takeaways

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For our 2013 outlook we have again teamed up with mergermarket to take the pulse of the Asia-Pacific PE industry. This year we interviewed 50 private equity investors (GPs), 30 institutional investors (LPs) and 20 private equity investment bankers in the Asia-Pacific region.

Top 9 takeaways from this year's outlook

Asia-Pacific's PE market remains vigorous

More than 85% of respondents say PE activity will increase over the next 12 months.

Greater China is the most active market

Greater China is the most active market

70% of respondents expect Greater China to see the most activity, despite concerns over the regulatory environment in the country.

The second most active region is expected to be Southeast Asia, including Singapore, Indonesia and Malaysia.The list below shows key regions and the percentage of respondents who believe each will see the most PE deal activity during the next 12 months:

  • Greater China - 70%
  • Southeast Asia - 16%
  • India - 4%
  • Australasia - 4%
  • Japan - 4%
  • South Korea - 2%

Capitalizing on the rise of the consumer

Capitalizing on the rise of the consumer

Energy, mining and utilities and consumer sectors will attract the most interest, up substantially from 2012. Southeast Asia, with an emerging affluent populace of 600 million, is on the rise; nearly half of respondents expect deal activity to expand significantly in the region.

Deal sizes and valuations rise

Although some respondents expect that buyers will face an impasse with sellers over valuation, most believe the valuation gap will remain about the same as previous years, allowing room for deals to close.

Expectations on exit routes are shifting

Respondents expect fewer exit opportunities via IPO in 2013. Exits to strategic buyers, however, are expected to increase as cash-rich firms look to expand into high-growth markets.

Capital flows will be greater than in 2012

Investor allocations to Asia-Pacific PE funds are expected to rise, and funds raising capital should meet or slightly exceed fund-raising targets. Country-specific funds are expected to garner the most interest.

Due diligence is the most important consideration

Due diligence processes of GPs topped the list of factors for fund investors making new allocations. Management team experience and fund diversification ranked second and third, respectively.

Competition for assets is heating up

Respondents say that, aside from other PE investors, corporate acquirers will offer the most competition. Sovereign wealth funds will also provide competition in certain sub regions.

The Asia-Pacific PE industry continues to evolve

By driving value creation in portfolios, internal operating partners will play an increasingly important role. Most respondents also believe PE firms will diversify their offerings to create value.