Asia PE fundraising drops by one third to $46.8b in 2012

China funds attracted $23.4 billion for the year in full, down 51.3%, and just $6.7 billion in the final six months, according to preliminary data from AVCJ Research. Renminbi fundraising came to $19.9 billion, while US-dollar vehicles received commitments of $3.5 billion, a year-on-year fall of 35.7% and 79.6%, respectively.

After reaching $15.7 billion in the first half of 2012, renminbi funds attracted $4.2 billion in the subsequent six months. The Chinese currency share of total Asia Pacific fundraising fell from 56% to 22% over the two periods.

Four of the five largest funds that reached a close in the first half of the year were renminbi vehicles, each one tied to regional government efforts to foster industrial development. Only one such fund appeared in the top five for the second half.

Looking at the leading funds to reach a final close between July and December 2012, there is a clear trend towards specialization. The top 12 features three infrastructure vehicles, two energy vehicles and three distress-focused vehicles. First and second place are occupied by PAG Asia I and Bain Capital Asia Fund II, on $2.5 billion and $2.3 billion, respectively. Six more pan-Asia buyout funds remain in the market, seeking about $25 billion between them.

Investment in the Asia Pacific region reached $57.2 billion in 2012, also the lowest level since 2009, with just over 1,600 deals completed compared to more than 2,000 the previous year.

Deal value in China specifically was down 27.5% year-on-year to $21.8 billion. Much of this was tied to a drop in growth capital activity as funds targeting high public market exit multiples withered in response to the weaker IPO environment. At the same time, the gap between entrepreneurs' valuation expectations and what PE investors are willing to pay remains significant enough to stymie deal flow.

For the region as a whole, growth capital deal value fell to $15.9 billion from $21.6 billion in 2011.

Buyout transactions, meanwhile, staged a mini-revival, with total deal value reaching $21.9 billion in 2012, up from $18.6 billion the previous year. China's nascent buyout market - including privatizations of US-listed Chinese companies - contributed to this, but the real spike in activity was seen in South Korea, where overall transaction value jumped nearly threefold to $7.1 billion.

In the second half of the year alone, MBK Partners announced the acquisition of a controlling stake in Woongjin Coway for $1.1 billion, with another $400 million interest expected to follow; a PE consortium led by Affinity Equity Partners paid $1.1 billion for a minority interest in Kyobo Life Insurance; and Shinhan Private Equity and Stonebridge Capital completed a $735 million carve-out from of SK Energy.

Private equity exits in Asia Pacific came to $52.6 billion in 2012, a multi-year high, although this figure includes $8.5 billion in proceeds from Japan Airlines' IPO following its restructuring by Enterprise Turnaround Initiative Corporation, a government-backed fund.

With little appetite for IPOs, trade and secondary sales once again came to the fore, reaching $32.9 billion, up slightly on the previous year. There were two significant secondary exits - one partial and one full - in the second half of 2012, as Bain Capital acquired the bulk of General Atlantic and Oak Hill's stake in Genpact for $1 billion and Permira paid Unison Capital a similar amount for Akindo Sushiro.

Open market exits came to $9.9 billion, down from $13.5 billion in 2011, although the year did see the conclusion of several series of block trades that span both periods. Permira completed its exit from Galaxy Entertainment as two share sales netted $1.6 billion in addition to a $614 million sale in 2011, while the The Carlyle Group sold the remainder of its stake in India's Housing Development Finance Corporation for $828 million.

Carlyle also sold shares in China Pacific Insurance worth $726 million in July, but the full exit - which has generated more than $5 billion across several block trades since late 2010 - didn't come until early 2013.

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• Topics
• Fundraising
• Investments
• Exits
• Asia
• Fundraising
• buyout
• Growth capital
• Exit
• China
• South Korea