Grim outlook for Asia-Pac private equity in 2023: Report

Macroeconomic weakness top concern now as last year’s regional deal value drops 44%

- Ovais Subhani

An unstable economic landscape amid higher inflation and weaker growth in 2023 will affect the performance of private equity firms in the Asia-Pacific region, said Bain Capital in a new report.

The grim outlook for private equity, which refers to capital investment made in companies that are not publicly traded, follows a turbulent 2022, when deal value across Asia-Pacific plummeted 44 per cent to US$198 billion (S$263 billion).

"Macroeconomic weakness is now the No. 1 concern keeping the region's investors awake at night," said Bain in its 2023 Asia-Pacific Private Equity report.

More than 50 per cent of private equity fund managers surveyed expect the negative trend to continue into 2024, added Bain, one of the world's top private investment firms with approximately US$160 billion of assets under management.

It said the beginning of an aggressive interest rate hiking cycle in 2022 by central banks, led by the United States Federal Reserve, flagged the end of cheap debt for buyout deals.

Recession fears spooked banks from providing leveraged loans, toppling year-end totals for deals, exits and fund raising.

Mr Hugh MacArthur, chairman of Bain's global private equity practice, said: "This pause has continued into 2023 and will likely persist until macro factors stabilise." Mergers and acquisitions by private equity firms in the Asia-Pacific in the first two months of 2023 fell 28 per cent from the same yearago period, according to data compiled by Bloomberg.