Asia-Pacific private equity outlook 2014
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
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
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
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
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.
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