That was the year that wasn’t?

Asia Pacific private equity’s evolution, from embryonic, to infancy, to bursting adolescence and now early maturity, seems to have been bookended by crises. The Asian financial crisis of 1997 onwards gave the nascent industry its first really big start, with the opening up of many Asian economies to large-scale turnaround investments that eventually led to the market-defining exits of 2003-04. Paradoxically, that earlier crisis also virtually wiped out most of the precursor operations in the region, leaving the new Asian private equity culture to be born from the ashes.

Twelve years on, and a second major systemic shock sets the seal on the Asia Pacific industry’s rise to global status. This time round, the impact is definitely global rather than regional; for all the talk of decoupling, this was a crisis created by international linkages and worked out through them – most of all the fundamental linkage between China, and Asia’s, breakneck growth and appetite for US Treasuries, and US and Western debt-driven consumption levels. And in private equity, the collapse of the Western buyout markets left Asia Pacific rising, or at least settling elegantly, as its US and European peers plummeted. The relative strength versus weakness in the West underwrote an absolute evolution in the size, maturity, and above all, significance of Asian private equity.

Pundits waiting for a market recovery and easy times ahead could be destined to be disappointed, though. As will be revealed next issue, macroeconomic managers face new challenges in when and how to exit from the stimulus programs that averted a global financial meltdown, and the largest packages and most pressing challenges are in China. Those sustained stimulus dollars also mean that valuations and expectations will remain high, so there will be no easy resumption of dealmaking in Asia’s ebullient growth capital markets. And not only are Western LPs still recovering their balance and coming back to the fundraising circuit slowly, they are also coming back with expectations and demands that will make GPs’ lives even more difficult.

So, no comforting return to business as usual, then. But whoever said that there could be? The world has apparently dodged the biggest bullet to brush by it in decades: anyone still looking for a return to 2006-07’s utterly unusual deal environment is probably too dizzy from the bounceback of 2H09.

That said, best wishes for the season to everyone – especially those who don’t let the recovery from near-despair gel into undue euphoria for 2010.

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• Topics
• Fundraising
• Funds
• Greater China
• North Asia
• North America
• Europe