2016-03-29-Bain-Asia-Pacific_Private_Equity_Report_2016_38页_2mb

Asia-Pacific Private Equity Report 2016 Summary

Core Content

The 2016 Asia-Pacific Private Equity (PE) Report by Bain & Company provides an in-depth analysis of the region’s PE industry in 2015, highlighting both the achievements and the challenges it faced. Despite a volatile global economic environment, the Asia-Pacific PE industry demonstrated resilience, posting record deal values, robust exit activity, and sustained returns. However, the report also underscores the growing uncertainty and the need for PE firms to adapt to a new normal characterized by slower growth, increased competition, and regulatory changes.

Main Points and Trends

1. Strong Performance in 2015

• Deal Value: Asia-Pacific PE deal value surged to $125 billion, a 44% increase from the previous year and nearly double the average of the prior five years.
• Deal Count: The number of transactions rose by 34%, reaching 955, with the region breaking through the 900 mark for the first time.
• Average Deal Size: Grew to $131 million, a 45% increase from the five-year average.
• Greater China Dominance: Accounted for about half of the region's total deal value, with $69 billion in deal value and $17 billion in public-to-private transactions.
• India and South Korea: Also saw record deal flows, while Southeast Asia and Japan experienced a decline.
• Internet Sector: Became the hottest area of focus, with $36 billion invested in 371 Internet-related deals and $15 billion in technology companies.
• Exit Value: Total exit value reached $88 billion, slightly below 2014’s record but still above the five-year average.
• Exit Channels: IPOs accounted for $40 billion, trade sales for $38 billion, and secondary exits for $10 billion.
• Returns: LPs were cash positive for the second consecutive year, with a $1.30 return per $1 called in the first half of 2015.
• Net IRR: Median net IRR for Asia-Pacific funds reached 12%, with top-quartile funds averaging 21%, exceeding LP expectations.

Key Challenges and Outlook

2. Macroeconomic Uncertainty

• Global Economic Slowdown: Oil prices dropped, China’s growth slowed, and equity markets faced significant volatility, making it harder for PE firms to find good companies and achieve strong returns.
• High Multiples: Despite the market downturn, average PE-backed valuations in the Asia-Pacific region rose to 17.8x EV/EBITDA, significantly higher than the US average of 10.1x.
• Unrealized Capital: The amount of unspent capital in the region increased by 23%, reaching $300 billion, indicating a potential slowdown in capital recycling.

3. New Normal in the Industry

• Shift in Investor Behavior: The "flight to quality" has intensified, with LPs favoring top-performing funds and reducing exposure to underperformers.
• Portfolio Activism: GPs are increasingly focusing on portfolio activism, acquiring more control over their investments and emphasizing value creation.
• Sector Diversification: There is a growing emphasis on diversification across sectors and geographies to mitigate risk.
• Coinvestment and Direct Investment: Large institutional investors, including sovereign wealth funds (SWFs), are increasingly engaging in coinvestment and direct investment, expanding opportunities for GPs.

Strategies for Success

4. Operational and Strategic Adjustments

• Focus on Resilient Sectors: GPs are targeting resilient sectors and improving due diligence to better assess downside risks.
• Internal Reorganization: Firms are reorganizing to devote more talent and resources to portfolio companies, especially those in turnaround and margin improvement.
• Exit Planning: Early and robust exit strategies are being developed to ensure that GPs can deliver strong returns even in uncertain conditions.
• Execution Excellence: The report emphasizes the need for sharpened execution across all stages of the investment cycle—from deal sourcing to value creation and exit.

Conclusion

The Asia-Pacific PE industry had a record-breaking 2015, driven by a surge in deal activity, strong exits, and improved returns. However, the report warns that the new normal—characterized by slower growth, higher valuations, and increased competition—requires GPs to refine their strategies, exert more control, and stay disciplined in their operations. The winners of this new era will be those that adapt quickly, focus on value creation, and leverage their strengths in a more challenging market landscape.