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Projected Shift in PE Investment Focus in Asia Pacific
|Current focus of investments||Focus of future investments (2010-2012)|
| Consumer & Retail||Agriculture|
| Financial Service|| Renewable Energy|
| Technology / Media|| Business Services|
| Manufacturing / Industrial|
| Infrastructure / Real Estate|
The shift in focus to Agriculture, Education and Renewable Energy has been driven by a tidal wave of interest in sustainable development projects across the board, many of which are subsidized by massive government spending, while Agriculture is seen to hold big upside driven by strong secular growth in global demand for agricultural products combined with constrained supply and high commodity prices.
Based on interviews with 20 business leaders within Asia’s Private Equity industry, including senior executives from Apax Partners, Baring Private Equity Asia, CLSA, GE Capital, Morgan Stanley, as well as ongoing market monitoring on PE industry trends, the “Asia Private Equity Leaders’ Outlook” white paper by GIA goes on to assess the current state of private equity in the Asia Pacific region, explores regional developments and aims to identify key investment strategies used by fund managers.
Other consequences of the global financial downturn on
Asia’s Private Equity activities in 2009 include:
Improvement in valuations and deal terms for investors
PE firms with ample cash reserves benefited from the lack of liquidity in the capital markets by being able to negotiate more favourable valuations and deal terms.
Competition for deals moderated
Competition from “me too” deal-makers was moderated during this period as many PE firms with limited cash reserves on hand and difficulty in raising new funds shifted focus to supporting existing portfolio companies rather than seeking new investment targets.
Exits deferred and importance of portfolio management increased
Due to unattractive exit options, PE firms opted to defer exits and to hold existing portfolio companies until more favourable exit conditions returned. In the meantime, increased focus was placed on improving portfolio company performance.
“On the whole, Private Equity firms that are more focused on Asia were less impacted by the economic crisis as compared to many US- or Europe-focused funds. Our research shows that Asia funds with less exposure to export oriented portfolio companies were least affected during the recent downturn. Moreover, many savvy PE investors used the downturn to generate value as a result of tempered competition for deals and fewer options for companies to obtain funding from illiquid capital markets” said Nicolas Pechet, Vice President and Head of GIA Group's operation in China and Head of the company’s global Private Equity practice.
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