Asia PE investment falls to six-year low in first quarter

Investment for the January-March period came to $23.2 billion, down from $59.5 billion in the final three months of 2019, according to provisional data from AVCJ Research. It represents the lowest quarterly total since 2014.

From a geographic perspective, China experienced the biggest drop-off, with deployments plunging from $30.2 billion to $6.7 billion. However, the impact was not even across the quarter. Taking private equity in isolation, $2 billion was invested in China in January, down from $9 billion in December. The total fell to $1.1 billion in February but then rebounded to $3.7 billion in March as new infections came under control and people emerged from lockdown.

In contrast, other markets in Asia remained active well into February but then activity declined substantially in March as COVID-19 spread. Private equity investors put $592 million to work outside of China in March, whereas the January total for Korea alone was $468 million.

Exits were hampered by corporates and financial sponsors freezing or abandoning sale processes as public market volatility – as well as more fundamental questions about business sustainability – threw valuations into flux. Asia exits for the quarter came to $3.3 billion, down from $17.7 billion in October-December 2019, with the number of announced deals dropping from 111 to 72. These levels haven't been seen since the global financial crisis.

Trade sale proceeds fell from $9.1 billion to $1.8 billion, with no transactions of $1 billion or more announced during the three-month period. Meanwhile, 31 private equity-backed IPOs raised a combined $3.8 billion. This compares to $11.3 billion from 53 offerings in the final quarter of 2019.

In terms of fundraising, a total of $9.7 billion was raised for Asia-focused vehicles, the worst showing since 2013. This capital was spread across 65 partial or final closes; one must go all the way back to 2004 to find a lower quarterly total. In October-December 2019, $23.8 billion was committed to more than 180 funds.

The Carlyle Group's fourth Japan fund was by some distance the largest raised during the quarter, coming in at JPY258 billion ($2.4 billion). Like most of the other managers that achieved final closes, most of the work was done well before travel restrictions were imposed in a bid to limit the spread of COVID-19.

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• Topics
• Fundraising
• Investments
• Exits
• Buyouts
• Expansion
• Asia