Slow Start for Asia’s Private Equity in 2024 Recovery on the Horizon

The Asian private equity market has experienced a significant downturn, marking its weakest first quarter since 2015, with private equity-backed mergers and acquisitions (M&A) in Asia plunging to $13.5 billion from January to mid-March. This 32 percent decline starkly contrasts with the global 21 percent increase in such deals. The slowdown, particularly pronounced in China, is attributed to economic deceleration, rising interest rates, market volatility, and geopolitical strife. These factors have not only reduced investment activities but also complicated the fundraising and exit strategies for private equity firms in the region.

Despite these challenges, the private equity sector in Asia is sitting on unprecedented levels of unutilized capital, with a pressing need for investment exits to rejuvenate the market. The first quarter saw a substantial drop in exits, the lowest since early 2014, indicating a cautious approach by investors, especially towards China, amid ongoing economic and geopolitical tensions.

Nevertheless, there are signs of potential recovery. The market is observing an increase in mid-market transactions, particularly in Southeast Asia, and a growing interest from Middle Eastern funds in Chinese assets. Expectations are cautiously optimistic for a revival in M&A activities in 2024, with a more aligned valuation expectation between buyers and sellers, suggesting a gradual improvement in the private equity landscape in Asia.