Japan Leads APAC in Private Equity Deal with Value Soaring 183% in 2023

Last year, the total value of private equity deals in the Asia Pacific region reached its lowest point since 2014, due to a decrease in fundraising amidst factors like slowing growth, high interest rates, and volatile public markets, as per management consultancy Bain & Company.

Japan, however, stood out with a 183% increase in deal value in 2023 compared to the previous year, establishing itself as the leading private equity market in Asia Pacific for the first time. According to Bain’s 2024 Asia-Pacific Private Equity Report, Japan’s attractiveness as an investment destination stems from its abundant target companies with potential for performance enhancement and the pressure on Japanese corporations to divest non-core assets through corporate governance reform.

The overall deal value in the Asia-Pacific region dipped over 23% to $147 billion from the previous year, marking a 35% decline from the 2018-2022 average and nearly 60% lower than the peak in 2021. Exit values also dropped by 26% to $101 billion in 2023, with 40% of exits being made through initial public offerings, and Greater China accounting for 89% of the IPO exit value.

Lachlan McMurdo, co-author of the firm’s annual report, highlighted that successful funds are not waiting for market rebounds for exits in 2024 but are strategizing to achieve target returns. Many private equity firms are exploring alternative asset classes like infrastructure, including renewable energy storage, data centers, and airports.

Some key points from the report include buyouts comprising 48% of total deal value in Asia Pacific last year, surpassing the value of growth deals for the first time since 2017. Despite a diminishing investor base, private equity returns remain more appealing than public markets over various time horizons.

The timing of a recovery remains uncertain, with Bain noting some positive trends at the end of last year. Disruptive technologies such as generative artificial intelligence are highlighted as promising areas for investment when the recovery phase arrives.

Japan, India, and Southeast Asia are singled out as favorable markets for private equity investments in the next 12 months, according to Bain’s report based on Preqin’s 2023 investor survey.