Private equity activities in Asia-Pacific have decelerated in the first half, continuing the downtrend from last year, Tim Burroughs, editorial managing director of Asian Venture Capital Journal (AVCJ), says.
The region's private equity fundraising came to US$17.3 billion between January and June, the lowest six-month level since 2009, AVCJ research shows. That is a 24.1% decline from the second half 2012.
About 38% of the capital allocated to Asia went to China in the first half. Of the US$6.6 billion private equity funds raised for China, US$4.8 billion were denominated in renminbi, down from US$6.4 billion in the previous six months. US dollar funds drew US$1.8 billion, the lowest level since 2009.
Private equity investments in Asia-Pacific amounted to US$27.8 billion, also the lowest six-month level since 2009, representing a 10.8% decrease from the second half 2012. China, India and Southeast Asia were the top three areas of interest.
China investments reached US$7.9 billion, down 25.5% from the previous six months. Growth and pre-IPO deals plunged 71% from the second half 2012 to US$1.4 billion while the buyouts fell 79.9% to US$985 million.
The deal slowdown in China was related to the public market exit multiples which have been falling for some months, the IPO freeze in the mainland, and the fewer take-privates of US-listed Chinese companies, Burroughs says.
The exits' value in the region came in at US$22.9 billion, down 35.3% from the second half 2012. Of the total, US$10.4 billion were from trade sales, US$8.1 billion from open market sales and US$3.8 billion from secondary sales.
But in China, the exits value surged 86.9% from previous six months to US$8.1 billion. This was mainly driven by three big deals — Goldman Sach's sales of shares in ICBC, Carlyle's sales of China Pacific shares and KKR's sales of stake in China Modern Dairy, according to the research.
“Though the IPO channel is currently blocked in the mainland, we are not really worried about that,” Gordon Chin, director of China-focused Lunar Capital Management (Shanghai), says. “As long as the business of the company is growing, we can find many other ways to exit,” he adds.