What private equity needs to know about investing in APAC: Part I

In this episode, our speakers help private equity investors understand how to navigate and set expectations in the APAC market.  

Related topics Private equity Strategy

It’s an exciting time for private equity (PE) in Asia-Pacific (APAC). According to Preqin, AUM for buyout funds focused on Asia have more than quadrupled over the last 10 years and firms now have more than USD $260b in AUM. They also have almost US$100b in dry powder available for deals. Taking a larger view, when we include some of the other private capital asset classes such as growth capital, venture, and infrastructure, PE firms focused on Asia have US$1.6t in AUM.

With 4.3 billion people and a blossoming middle class, the positive growth we are seeing in APAC is a contrast to slowdowns in the US and Europe. As a result, PE investors are eager to put capital to work in the region using the LBO strategies and playbooks that have proven successful in the US and Europe. This can be problematic for several reasons:

  • Because the region is dominated by small and mid-size enterprises (SME), 70%-80% of PE deals are minority investments.
  • PE is often in an influential (not controlling) position, with limited ability to dictate changes in management.
  • It’s difficult to find and execute a viable LBO deal due to a cultural perceptions that associate selling a business with a failure of its management.
  • APAC is a fragmented market with multiple languages, cultures, legal jurisdictions and working customs.

The region has not always been open to foreign capital, and while this is changing, legal and regulatory requirements in a fragmented market demand local expertise.

Six ways PE investors can adapt to APAC:

  • Choose businesses with capable, collaborative management in addition to competitive advantage and growth potential.
  • Realize your ability to use leverage is dramatically reduced.
  • Prepare to influence and support rather than dictate by demonstrating how your expertise and operational value creation is accretive to the business.
  • Consider walking away from attractive deals in which PE and management are fundamentally misaligned.
  • Avoid an ethnocentric, “colonial” approach: instead, lead with empathy and confidence in local talent.
  • Present operational value creation and ESG as positive value accretion methods that improve the quality of a business.

For your convenience, full text transcript of this podcast is also available. Read the transcript

Presenters

Josh Lewsey
EY-Parthenon Partner, Strategy & Transactions, Ernst & Young Limited
John Levack image
John Levack
Vice Chairman, Hong Kong Venture Capital and Private Equity Association
Winna Brown
EY Americas Financial Accounting Advisory Services Private Equity Leader

Podcast

Episode 16

Duration 27m 18s

In this series

series overview
(Event List - Manual)

What private equity needs to know about investing in APAC: Part I

In this episode, our speakers help private equity investors understand how to navigate and set expectations in the APAC market.
Podcast

Episode 16

Duration
27m 18s

Presenters

Josh Lewsey

EY-Parthenon Partner, Strategy & Transactions, Ernst & Young Limited

John Levack

Vice Chairman, Hong Kong Venture Capital and Private Equity Association

Why PE should remain bullish on healthcare deals

In this episode, our speakers explain why PE should remain optimistic about investing in the healthcare sector despite the short-term detriment of COVID-19.
Podcast

Episode 15

Duration
25m 00s

Presenters

Jeffrey M. Woods

EY-Parthenon US Co-Head of Health Care

Winna Brown

EY Americas Financial Accounting Advisory Services Private Equity Leader

Why PE must embed geostrategy to win in the market

In this episode, our speakers explore why PE must embed geostrategy in order to recognize unique opportunities and drive investment decisions.
Podcast

Episode 14

Duration
25m 17s

Presenters

Winna Brown

EY Americas Financial Accounting Advisory Services Private Equity Leader

How customer experience is driving digital transformation in PE

In this episode, our speakers explore how experience-led transformation is inspiring digitalization across the PE portfolio.
Podcast

Episode 13

Duration
25m 17s

Presenters

Sean Epstein

Senior Vice President and Global Head of SAP Private Equity & Mergers and Acquisition Programs

Winna Brown

EY Americas Financial Accounting Advisory Services Private Equity Leader

Why PE’s role in our economy and society is more important than ever

In this episode, our speakers explore the evolution of private equity and the role it will play in a post-COVID world.
Podcast

Episode 12

Duration
23m 00s

Presenters

Andres Saenz

EY Global Vice Chair – Industry Markets

Winna Brown

EY Americas Financial Accounting Advisory Services Private Equity Leader

How COVID-19 is transforming the PE operating model

In this episode, our speakers describe how COVID-19 is transforming operating models across the PE portfolio and beyond.
Podcast

Episode 11

Duration
29m 00s

Presenters

Tim Dutterer

EY-Parthenon Head of Private Equity

Gregory W. Schooley

EY-Parthenon US Value Creation Leader; Principal, Ernst & Young LLP

Why a post-pandemic supply chain will prioritize resilience over efficiency

In this episode, our speakers explain why a post-pandemic supply chain will prioritize resilience over efficiency.
Podcast

Episode 10

Duration
27m 00s

Presenters

Jeff Schlosser

EY US Supply Chain Transactions Leader

Winna Brown

EY Americas Financial Accounting Advisory Services Private Equity Leader

Why “cash culture” is a critical lever in today’s PE climate

In this episode, our speakers explore why freeing cash from working capital can allow PE to prolong sustainability, realize value sooner and invest earlier.
Podcast

Episode 09

Duration
27m 00s

Presenters

Sven R. Braun

EY-Parthenon Principal, Ernst & Young LLP

Nick Boaro

EY-Parthenon Partner, Ernst & Young LLP