Private equity (PE) fundraising in Asia Pacific fell to a 10-year low in 2023, with dealmaking and exits also dropping sharply as investors pulled back amid the ongoing macroeconomic uncertainty, according to a new report.
APAC PE funds raised just $100 billion last year, the lowest in a decade, according to Bain & Co’s Asia-Pacific Private Equity Report 2024.
Even as investors raised new funds in one of the toughest fundraising environments, they shifted their focus away from the Asia-Pacific region. The global share of Asia Pacific-focused private capital funds fell to 9%, a sharp fall from an average of 23% over the last decade.
Global general partners (GPs) reduced their investments in Asia-Pacific countries in 2023, and deals and exits declined. Global fundraising, however, fared better. While capital raised by PE funds globally fell 17% over 2022, Asia Pacific-focused funds saw a steeper 26% fall.
China jitters send investors to Japan
In China, investors remained cautious amid the geopolitical tensions, property crisis, and slowing economic growth. Deal value fell 58% compared with the previous five-year average, reducing its share in total Asia-Pacific deal value to 28%, down sharply from the previous five-year average of 43%.
RMB funds accounted for a larger share of the market at 43%, up from 27% in 2022. Several sizeable government-backed funds were closed, contributing to the increase, including the $22-billion Guangzhou Industry Fund of Funds and the $7-billion Guangzhou Venture Capital Fund of Funds.
A bright spot amid turbulent times in the Asia-Pacific PE market was Japan, where deal value rose 183% over the prior five-year average, making it the region’s top deal market for the first time.
Mega deals, or deals valued over $1 billion, were the largest factor behind Japan’s surge in deal value, helping boost the country’s share in total Asia-Pacific deal value to 30%, compared with the previous five-year average of 7%, and making it the only market in the region to grow in 2023.
Exit routes remain closed
Exits plunged to $101 billion in 2023, plummetting 26% from the previous five-year average and declining 51% from the record-breaking level in 2021.
Most GPs blamed troubled macroeconomic conditions for the tough exit environment, followed by underperforming and unpredictable IPO markets.
Exit value in 2023 declined across the region, except India, Japan, and South Korea.
In most countries, public markets had a limited appetite for IPOs. Overall, this exit route accounted for 40% of the exit value, roughly on a par with the previous five-year average. Greater China accounted for 89% of exit value by IPO, up from the previous five-year average of 77%.
Given the limited opportunity for IPOs, GPs turned to secondary exits, which comprised 27% of the exit value, up 10% from the previous five-year average.
