Asia fundraising frustrates in first half of 2023

Investments and exits were also muted as macroeconomic uncertainty, geopolitical tensions, and rising capital costs eroded market sentiment. Private equity investors put USD 84.7bn to work in the first six months of the year, compared to USD 132.3bn for the same period in 2022, according to provisional data from AVCJ Research. Exits dropped to USD 15.1bn from USD 46.7bn.

The drop-off in fundraising hit every major market in the region. If anything, the impact was less severe in China, where commitments to US dollar funds reached USD 5.7bn, down from USD 8bn a year earlier. That said, the number of incremental and final closes fell by about half, confirming an existing trend – also visible region-wide – of capital coalescing around a relatively small subset of managers.

Primavera Capital Group registered the largest US dollar fund in China, and regionally, announcing a USD 4bn final close on its fourth vehicle in May. However, the bulk of the capital was raised prior to the outbreak of war in Ukraine. This underscores the difficulties China managers face, not only with a global LP base that is risk-off, but also with a cohort of US investors wary of committing for geopolitical reasons.

There are 11 Chinese funds in the top 25 closes from the first half of the year; Primavera is the only US dollar representative. Of the USD 38.5bn raised by renminbi funds – up from USD 17.1bn a year earlier – three-quarters went to two guidance funds supported by the Guangzhou provincial government. These vehicles are mandated to source inbound investment and backed by government or state-owned LPs.

Other significant fundraising activity from the first six months included final closes for Advantage Partners on its seventh Japan fund (USD 969m), Nexus Venture Partners on its seventh India VC offering (USD 700m), and Crescent Capital Partners on its seventh Australia and New Zealand fund (USD 666m).

The drop in private equity investment was driven by weakness in the growth and venture segments; buyout activity was stable compared to the first six months of 2022. Growth capital and venture capital deal volume amounted to USD 34.6bn and USD 7.6bn, respectively, each down by about 50%.

This corresponds to a decline in the technology sector activity, following public market corrections and concerns about announced or impending collapses in private market valuations. Investors deployed USD 19.2bn in the technology sector in the first six months of the year, down 60%. Manufacturing and electronics posted the biggest gains on a sector basis.

Three of the four largest announced deals were in Japan: take-privates of USD 15.9bn and USD 6.7bn involving Toshiba Corporation and JSR Corporation, and the USD 2.6bn sale of a 50% stake in Works Human Intelligence. It meant Japan accounted for 35% of all capital deployed in Asia. China and India, both growth capital hotspots, came second and third but their first-half totals were down by about 50%.

Exits were hampered by a paucity of trade sales. Fewer than 100 deals amounting to USD 4.6bn were announced, compared to USD 26.1bn from more than 150 in the first half of 2022. Sponsor-to-sponsor sales also declined (from USD 16.1bn to USD 9.9bn) but they were still responsible for two-thirds of overall exit volume.

Seven of the 10 largest exits were sponsor-to-sponsor transactions, led by Works Human Intelligence, India’s Manipal Health Enterprises, and Korea’s SK Shieldus and Airfirst.

See here for further analysis of Asia private equity activity in the second quarter of 2023.

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• Topics
• Fundraising
• Buyouts
• Expansion
• Trade sale
• Buyout
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• Technology
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• Asia