Private equity deal activity in Asia-Pacific slips in H1 2024

Private equity and venture capital investments in Asia-Pacific, excluding Japan, declined 35.7% from a year earlier to $9.85 billion in the first half of 2024, according to S&P Global Market Intelligence data.

If the current dealmaking pace continues for the rest of the year, 2024 will likely see a significant fall in transaction value compared with the $27.91 billion recorded in 2023.

The number of deals is also headed for another down year, with 85 reported in the first half of 2024 compared with the full-year 2023 total of 226.

Cautious approach amid challenges

Investors are leaning toward more control-oriented buyouts rather than growth investments in the region.

This shift has been accompanied by a decrease in average deal size compared with the 2021 peak, said Sebastien Lamy, co-head of the Asia-Pacific private equity practice at Bain & Co.

Macroeconomic uncertainties and a scarcity of exits are major factors contributing to the decline. These issues hindered the recycling of limited partner capital, impacting overall investment activity.

"Valuation conversations still remain difficult," said Navas Ebin, managing director for Asia-Pacific at Liquidity Group, referring to the gap between buyer and seller expectations on price. "Many VCs and PEs are being cautious with their approach."

Deal activity seems to be picking up in the second quarter. Private equity and venture capital deal value was $7.87 billion, up 11% compared with the second quarter of 2023 and nearly quadruple the amount in the prior quarter.

– Read about US-backed funding rounds in China. – Catch up on private equity deal activity in Asia-Pacific in the first quarter. – Explore more private equity news.

Private equity transactions accounted for about 9% of all second-quarter M&A deals in the region, which had a combined value of $87.87 billion. M&A deals totaled $103.91 billion in the second quarter of 2023, 6.8% of which had private equity involvement.

Largest deals

For the largest private equity-backed deal in the region during the first half, Affinity Equity Partners agreed to acquire South Korea-based car rental services provider SK Rent A Car Co. Ltd. from SK Networks Co. Ltd. in a take-private transaction valued at $2.31 billion.

The second-largest deal was KKR & Co. Inc.'s agreement to acquire the wealth management and corporate trust businesses of Australian investment manager Perpetual Ltd. for more than $1.4 billion. The transaction requires shareholder and regulatory approvals, with an expected completion date of February 2025.

Mixed recovery signals

Improved visibility on the direction of interest rates and record private equity dry powder — capital raised but not yet invested — are pressuring general partners (GPs) to make deals, according to Lamy.

GPs are increasing investments in India, Japan and, to an extent, Korea.

However, "macroeconomic and geopolitical risks continue to make it hard to assess deals. GPs are also still working a large 'exit glut' given exits have continued to be weak," Lamy said.