PE deals in Asia-Pacific fall in 2022 as US investors drop China for India

Investors favour technology companies in India and Southeast Asia, says one analyst

Private equity (PE) and venture capital (VC) investments in Asia-Pacific excluding Japan continued their downward trajectory when 2022 closed.

Deals totaled $5.39 billion across 42 announced and completed transactions in the fourth quarter of 2022, compared to $20.07 billion across 79 transactions in the same period in 2021, according to data from S&P Global Market Intelligence.

Deal value and volume have slowed down since the third quarter of 2021, a period that saw the highest PE investments in the region in the last two years.

In 2022, aggregate transaction value ($35.43 billion) and the number of deals (208 transactions) fell to the lowest level in the last five years. Activity had peaked in 2021 when private equity transacted 347 deals valued at $74.08 billion.

China investments decline

Last year’s slowdown in Asia-Pacific deals is linked to the pullback by US institutional investors in China, said Cate Ambrose, chief executive officer of the Global Private Capital Association, in an interview with Market Intelligence. Investment capital is being primarily reallocated to India.

"There is a lot of excitement about India right now in terms of the scale of the market," Ambrose said.

Investors see technology companies in India and Southeast Asia, in particular, as more valuable picks compared to counterparts in the US or China, Ambrose added.

M&A activity in Asia-Pacific recorded a total value of $203.98 billion in the fourth quarter of 2022, increasing from $179 billion in the same period in 2021. Transactions with private equity involvement dropped to 2.7% of the total M&A value, compared to 12.6 per cent in the fourth quarter of 2021.

Biggest deals

EQT AB's $7.45 billion buyout of Hong Kong-based firm Baring Private Equity Asia was the biggest transaction with PE involvement in 2022. Morgan Stanley & Co. International PLC was the financial adviser for the buyer, while The Goldman Sachs Group Inc. and JPMorgan Chase & Co. were advisers to Baring for the deal.

The Hina Group and Industrial Bank Shanghai Branch's bid to acquire software services company VNET Group Inc. for $2.87 billion ranked second. Kroll Securities LLC and Kroll LLC were the financial advisers for VNET.

In the fourth quarter of 2022, MBK Partners' $1.82 billion acquisition of South Korea-based Medit Corp., which manufactures technology solutions for dental clinics and labs, was the top transaction.

Key highlights for the analysis include: 

• Deal value and deal volume have been slowing since the third quarter of 2021, the period that saw the highest private equity investments in the region in the last two years.
• In 2022, aggregate transaction value and the actual number of deals fell to their lowest levels in the last five years at $35.43 billion and 208 transactions, respectively. Activity peaked in 2021 when private equity transacted 347 deals valued at $74.08 billion.
• Overall M&A activity in Asia-Pacific recorded a total value of $203.98 billion in the fourth quarter of 2022, an increase from $179 billion in the same period in 2021. Transactions with private equity involvement dropped to 2.7% of the total M&A value, compared to 12.6% in the fourth quarter of 2021.
• EQT AB (publ)'s US$7.45 billion buyout of Hong Kong-based firm Baring Private Equity Asia was the biggest transaction with private equity involvement in 2022.

(Source:S&P Global Market Intelligence)