Apac private equity upbeat on exits despite deal volumes thinning: Dechert
Daphne Yow
ASIA-PACIFIC (Apac) private equity (PE) fund managers have named fundraising as their biggest challenge, a report by law firm Dechert released on Monday (Nov 6) indicated.
In particular, APC fund managers identified large limited partners concentrating their deployments on a smaller number of funds as a key hurdle. Of the Apac fund managers surveyed, 30 per cent cited this as a challenge, almost double the global figure of 16 per cent.
However, Apac fund managers are more optimistic about exit prospects than their global counterparts, with 35 per cent viewing conditions over the next year as being “somewhat favourable” for exits. This is compared with 20 per cent in North America and 2 per cent in Europe, the Middle East and Africa (Emea).
Boon Siew Kam, co-head of Dechert’s global PE practice and partner in Dechert (Singapore), said that this is natural given that Apac is the fastest growing region in the world.
“However, everything is relative, and it remains the case that the (Apac) region has lower exit volumes than North America and Emea,” said Boon.
She added: “Limited exit volumes in Asia and its relative economic outperformance mean that GPs (general partners) in the region are less likely to follow the wait-and-see tactic of extending their holding periods to benefit from a market rebound. Instead, they are seeking to crystallise returns in the immediate term, provided buy-side offers meet their expectations.”
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Meanwhile, PE deal value and volume in Apac has declined year on year in the first nine months of 2023.
Deal volume fell 30 per cent year on year to 1,482 deals, and deal value decreased 35 per cent year on year to US$84 billion.
By quarter, deal volume declined 32 per cent to 358 deals in Q3, from 530 deals in Q2. Deal value fell 42 per cent to US$17.9 billion in Q3, from US$31.1 billion in Q2.
The decline in the Apac PE market mirrors global trends and is in line with a tougher global deal environment.
However, Boon noted that various South-east Asian countries – Indonesia, the Philippines, Thailand and Vietnam – are increasing their proportion of Apac’s PE deal market, riding on favourable trends such as young populations, increasing incomes and swift urbanisation and digitisation.
Global PE deal volume fell 28 per cent year on year to 6,304 deals in the first nine months of 2023, and deal value dropped 45 per cent to US$448 billion year on year, reflecting tighter debt financing terms.
This is as the global market “essentially recalibrated to its pre-pandemic baseline following a frenetic couple of years”, noted the report. PE deal volume had reached a five-year-high in 2022, while deal value hit a four-year-high in 2021.
Dechert said that GPs are concerned over today’s high-rate environment and how it will affect their ability to close new deals over the next 12 months.
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