Five trends for 2017

What do the next 12 months have in store? AVCJ has some ideas, but first here is a review of the predictions made for 2016...

• A BIG YEAR FOR AUSTRALIAN INFRASTRUCTURE
The three largest private markets transactions completed in Asia - accounting for 25% of total investment - involved Australian infrastructure: Ausgrid, Port of Melbourne Corp, and Asciano.

• INCREASED BIFURCATION IN THE FUNDRAISING MARKET
Yes and no. The fundraising market is indeed increasingly bifurcated, but only one US dollar-denominated fund pan-regional fund has achieved a final close of $3 billion or more in 2016.

• NO RECORD-BREAKING BUYOUTS
Correct, if the big Australian infrastructure deals are excluded due to the different risk-reward. And an honorable mention to KKR's $4.5 billion tender offer for Calsonic Kansei Corp - large by Asian standards

• A UNICORN WILL DIE
M&A rather than outright death. Transactions include Mogujie's absorption of Meilishuo in China and Alibaba Group's acquisition of Lazada in Southeast Asia.

• A RENMINBI RESURGENCE
Yes, although the resurgence has primarily been driven by a handful of government-backed funds.

Which brings us to the five trends for 2017...

• A CONTINUED RENMINBI RESURGENCE
The point about managers opting for renminbi vehicles because they offer the flexibility to invest in areas where foreign capital is unwelcome or in companies seeking onshore listings remains valid. And for those without long track records, it might just be easier than courting international LPs. Expect these factors - plus the increasing professionalization of the renminbi space with more institutional capital coming in - to drive fundraising activity.

• SECONDARIES SURGE
A difficult prediction to make, because it feels like people have been making it for several years. However, a generation of India and China funds are a year older, and for many, liquidity events are not getting any nearer. Buying more time for a portfolio through a secondary spin-out or selling off tranches of assets in order to generate returns will increasingly appeal to GPs and LPs.

• A PAN-REGIONAL TURNING POINT
Over the coming 12 months, TPG Capital, KKR and The Carlyle Group are expected to be marketing their latest Asian funds. The track records and personnel changes at these global giants will come under scrutiny. Past experience suggests it will not be plain sailing for all.

• DOWN ROUNDS, OF SIGNIFICANT SIZE
Raising debt, rather than raising equity at a diluted valuation, is only an option for start-ups with meaningful cash flow. As such, down rounds and dirty term sheets - where the valuation is slightly up, but the conditions are draconian - will likely proliferate, with even the largest players drawn into the fray.

• A BIG YEAR FOR JAPAN
Private equity investment in Japan has seen a near threefold year-on-year increase to reach $9.7 billion in 2016, the highest level since 2007. With gradual but growing success in terms of securing carve-outs from conglomerates and rising succession planning transactions in the middle market, 2017 could see a repeat performance - in terms of deal volume if not deal value. With 10 or so GPs also in the market with new vehicles, fundraising activity is also likely to spike.

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• Topics
• Exits
• Buyouts
• Expansion
• Fundraising
• GPs
• Asia