going south

East Asian PE Dealmaking Doubles in 2012

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November 26, 2012

Private-equity transactions in Southeast Asia have already more than doubled in value this year to USD 3.6 billion, up from USD 1.3 billion last year, according to data from the Centre for Asia Private Equity, and cited in the WSJ Deal Journal blog.

 

With that in mind, we digested the latest PE study about Asian markets published by Merrill Data Site. Based on interviews with several regional experts, the report highlights PE trends and developments in East Asia, including a discussion on take-privates (or delistings) and relisting on page 11 and 12.

Key trends

  • An increase in controlling interest deals
  • The market is maturing – there are fewer easy to target buyouts of established businesses and market leaders as many have already gone public and have become quite large
  • PE firms are targeting second and third tier companies. e.g. instead of a bank, people are investing in a leasing company; or instead in investing in the leading shoe company, or leading milk company, investors are moving to inland China, to the second, third, fourth tier cities and investing in second, third, fourth tier companies in terms of size and hoping to make them larger.
  • Competition is increasing – in addition to the large global funds, more regional funds and a lot more country specific funds, not only in China but in South East Asia, Korea and Australia as well.
  • Due diligence must include local inspection and deep consideration of regulatory and tax issues (a confirmation of last week’s Deutsche Börse study findings that we highlighted here).
  • The two most popular sectors for private equity in China are financial services, and retail & consumer. There has also been a rise in deals in the industrial sector outside China
  • China is not a single market – it looks more like an “amalgamation of 30 different provincial markets. (Image source: WSJ)
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