Asia PE investment ends 2020 on a tear

After a slow first quarter during which certain countries – notably China – experienced full or partial lockdowns, investment activity had largely bounced back by the middle of the year. The 2020 total is the third-highest on record, after 2017 and 2018, when capital deployed exceeded $200 billion, according to provisional data from AVCJ Research. In 2019, investment came to $169.6 billion.

The $67.2 billion put to work in the final three months of last year represents an all-time quarterly high. Growth capital deals accounted for 63% of the total, with large funding rounds in China’s technology and education sweet spots. India also weighed in as Reliance Industries secured substantial funding for its retail business, which is pursuing an online-to-offline strategy.

Private equity fundraising for 2020 came to $102.4 billion, down from $122.5 billion the previous year. A decline was widely expected given travel restrictions prevented most GPs and LPs from meeting face-to-face, making it difficult to conduct due diligence on new managers.

Indeed, 2020 was a year for re-ups and a flight to familiarity. Pan-regional funds benefiting, scooping up half of all capital committed, if renminbi-denominated funds are excluded. This included substantial closes by the likes of MBK Partners, CVC Capital Partners, and KKR. As of September, the latter had accumulated $13.1 billion for its fourth flagship Asian fund against a target of $12.5 billion.

Only three mainstream strategies attracted more capital in 2020 than they did in 2019: pan-regional, US dollar-denominated China venture capital, and Japan buyout. The Japan total of $3.9 billion is the highest on record, with established managers scaling up in fund size.

Fundraising slumped to $15.6 billion in the last three months of the year after picking up in the second and third quarters. Private equity exits have been a challenge throughout 2020, resulting in a full-year total - $31.8 billion – that is the lowest since the aftermath of the global financial crisis. The fourth-quarter figure of $7.8 billion represents only a modest increase over the first quarter. 

Trade sales were noticeably weak as an inability to inspect assets first-hand, as well as uncertainty around valuations and market outlook, curtailed processes. Deal value and volume were down 63% and 55% year-on-year, respectively. Buyers were often based in the same jurisdiction as the target assets or at least had a presence there.

Meanwhile, bullish public markets led to robust IPO activity. There were 274 private equity-backed offerings in 2020, with cumulative proceeds reaching $45.2 billion. This compares to $29.6 billion from 176 offerings the previous year. China’s Star Market, which targets technology businesses of a certain size and offers a smoother path to listing than other bourses, was the most active exchange. 

However, the largest IPOs for Chinese companies with financial sponsors still took place offshore. JD Health led the way with its $3.8 billion Hong Kong offering, followed by real estate platform Ke Holdings and electric vehicle manufacturer Xpeng, both of which went public in the US.

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• Topics
• Expansion
• Buyouts
• Fundraising
• Exits
• IPO
• Greater China
• Australasia
• Southeast Asia
• South Asia
• North Asia
• Asia