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1、Asia-Pacific Private Equity Report 2023 After a turbulent year,investors brace for more uncertainty.This work is based on secondary market research,analysis of financial information available or provided to Bain&Company and a range of interviews with industry participants.Bain&Company has not indepe

2、ndently verified any such information provided or available to Bain and makes no representation or warranty,express or implied,that such information is accurate or complete.Projected market and financial information,analyses and conclusions contained herein are based on the information described abo

3、ve and on Bain&Companys judgment and should not be construed as definitive forecasts or guarantees of future performance or results.The information and analysis herein do not constitute advice of any kind,are not intended to be used for investment purposes,and neither Bain&Company nor any of its sub

4、sidiaries or their respective officers,directors,shareholders,employees,or agents accept any responsibility or liability with respect to the use of or reliance on any information or analysis contained in this document.This work is copyright Bain&Company and may not be published,transmitted,broadcast

5、,copied,reproduced or reprinted in whole or in part without the explicit written permission of Bain&Company.Authors and acknowledgmentsThis report was prepared by:Kiki Yang,a Bain&Company partner based in Hong Kong and coleader of the firms Asia-Pacific Private Equity practice;Thomas Kidd,a partner

6、based in Singapore and a member of Bains Southeast Asia Private Equity practice;andElsa Sit,practice vice president with Bains Private Equity practice.The authors wish to thank Karren Harris,Nancy Zheng,Allison Gao,Usman Akhtar,Hao Zhou,Wonpyo Choi,Sungwon Yoon,Sriwatsan Krishnan,James Viles,Lachlan

7、 McMurdo,Sebastien Lamy,Ben Balzer,Alex Boulton,Vikram Kapur,Kelly Pu,Andrea Campagnoli,Jisoo Ahn,and Lars Verheyen for their perspectives on macroeconomic implications;Hugh MacArthur,Rebecca Burack,Charles Lambert,Marco DAvino,Sushil Pasricha,and Hiroaki Adachi for their perspectives on performance

8、 improvement;Winnie Xie and Owain Palmer for their contributions;Usman Akhtar,Hao Zhou,Wonpyo Choi,Sungwon Yoon,Sriwatsan Krishnan,A Prabhav Kashyap,Sai Deo,James Viles,and Jim Verbeeten for their input on regional dynamics;Echo Han,Dhawal Pandey,Sanyam Sharma,and the team from the Bain Capability N

9、etwork(Ira Kaur,Vikas Sharma,Gagandeep Singh,Deep Zabakh,Ananya Malhotra,and Ritvik Vasudeva)for their analytic support and research assistance;and Gail Edmondson for her editorial support.We are grateful to Preqin and Asia Venture Capital Journal(AVCJ)for the valuable data they provided and for the

10、ir responsiveness.Copyright 2023 Bain&Company,Inc.All rights reserved.Asia-Pacific Private Equity Report 20231ContentsEconomic turmoil,global tensions,and a new era of slower growth.2What happened in 2022?.4Deals:a dramatic fall .6Sector view:Internet and tech out in front .10Competition eases .11Mu

11、ltiples slide.12Exits plummet.14Fund-raising plunges .16Returns still rising.21Riding out the storm .23Smart investing in a downturn .24Pre-deal strategies .26Spot the winners.27Scenario planning .28Post-deal strategies .29Portfolio companies:fit for the storm .32Procurement .33Supply chain .36Corpo

12、rate support .37Asia-Pacific Private Equity Report 20232Economic turmoil,global tensions,and a new era of slower growthAsia-Pacific private equity funds turned cautious in 2022,ending two years of record dealmaking.By midyear,an economic slowdown collided with mounting global and regional uncertaint

13、ies to produce a perfect storm for investors.As companies struggled,general partners(GPs)retrenched and Asia-Pacific deal value plummeted 44%to$198 billion(see Figure 1).Exits and fund-raising also fell sharply below 2021 levels.In golden hindsight,investor exuberance and a superabundance of global

14、capital helped propel Asia-Pacific deal value to an extraordinary high in 2021.That set the stage in 2022 for an equally sharp decline as economic forces battered the market,pushing deal value to the level of 2020.Many conditions contributed to investor gloom,including slower economic growth,declini

15、ng consumer confidence,falling manufacturing output,high inflation,and heightened geopolitical tensions.Even the relaxation of Covid restrictions across the region failed to reverse the trend.Macroeconomic weakness is now the No.1 concern keeping the regions investors awake at night,according to Bai

16、ns 2023 Asia-Pacific Private Equity survey.Greater China,the regions private equity powerhouse,suffered the biggest contraction in deal activity.Covid lockdowns,declining growth,and Sino-US tensions contributed to a 53%drop in Greater China Figure 1:Asia-Pacific deal value,exit value,and fund-raisin

17、g all plunged in 2022Note:Excludes real estateSources:AVCJ;PreqinAsia-Pacific private equityinvestments($B)Asia-Pacific private equity exits($B)Asia-Pacific-focused closedfunds,by close year($B)Deal countExit count18158199221199221322016$109B1713020911,00050002016$352B1734718283192492017921184221050

18、1,0002,0003,0002016 171819202122198354201163190177$147BAsia-Pacific Private Equity Report 20233deal value from a year earlier.That fall depressed Greater Chinas share of Asia-Pacific deal value to a nine-year low of 31%.Internet and technology,still the regions largest investment sector,made up only

19、 33%of Asia-Pacific deal value in 2022,the lowest level since 2017.Inflation,which erodes topline growth and profitability,contributed to the decline in the sectors share of deal value.Investors turned instead to defensive sectors that offer steady cash flow and lower risk,including advanced manufac

20、turing and energy and natural resources.Investments in critical infrastructure across the region also contributed to the growing number of deals in these sectors.An uncertain business outlook and lower ratings for public companies helped push deal multiples down to 12 times from 13.1 times(median en

21、terprise value to EBITDA)a year earlier.The slowdown in dealmaking and fewer top-priced Internet and tech deals also depressed valuations.However,GPs still dont view current valuations as attractive,given ongoing market uncertainty.High entry multiples remain a top concern,according to our 2023 surv

22、ey.Turbulent market conditions and uncertainty pushed less-competitive investors to the sidelines in 2022.The number of active investors dipped 2%,the first decline since 2015.The top 20 investors accounted for 32%of deal value,up slightly.Fund-raising also suffered.The total capital raised by Asia-

23、Pacific-focused funds fell 43%to$105 billion,and on average,GPs needed more time to close new funds.However,global and regional flagship funds that have strong track records and local operations were less affected.The macroeconomic landscape remains unstable,and higher inflation and weaker growth ar

24、e likely to have a strong impact on investment choices and portfolio performance in the coming year.Despite a stormy and unpredictable investment climate,Asia-Pacific dry powderthe level of unspent private equity capitalrose to a record$676 billion.Returns of Asia-Pacific-focused funds remained stro

25、ng,and private equity continued to outperform public markets.The macroeconomic landscape remains unstable,and higher inflation and weaker growth are likely to have a strong impact on investment choices and portfolio performance in the coming year.The best firms are adapting their strategies and empl

26、oying scenario planning to identify winners in the right sectors.GPs are also taking a more active role in portfolio management.Nearly one in four GPs say cost improvement is the most important contributor to strong returns,up from only 5%five years ago,and is now second only to topline growth.4Afte

27、r a decade of strong growth and surprising resilience through the first two years of the Covid-19 pandemic,Asia-Pacifics private equity market took a nosedive in 2022.Amid growing macroeconomic gloom,consumer confidence deteriorated and manufacturing slumped.At the same time,governments tightened cr

28、edit and public debt rose as currencies depreciated,undermining financial stability.Investors,sensing a new era of slower growth,mounting inflation,and greater uncertainty,took time out to recalibrate their strategies,recognizing that what worked well in the past may not be the right approach for 20

29、23 and beyond(see Figure 2).A couple of developments highlight the sobering economic shift for private equity investors.Chinas GDP growth dropped to 3%in 2022,down sharply from an annual rate of about 7%during the last What happened in 2022?Figure 2:Asia-Pacific economies face growth and stability c

30、hallengesNotes:Southeast Asia reflects data from Malaysia,the Philippines,Thailand,Vietnam,Indonesia,and Singapore;all measurements are 2022 averages vs.2021 averagesSources:Departments of statistics in respective countries;IHS Markit;Bloomberg;Refinitiv;WindSlowing growthHigher inflationWeakeningdo

31、mestic currenciesReal GDP growthBasis-point changePMIPercentage change Consumer pricesYoY monthly percentagechange Producer pricesYoY monthly percentagechangeValue vs.US$Percentage change300bps0300600Southeast AsiaAustraliaSouth KoreaJapanIndiaChina2%0246Southeast AsiaAustraliaSouth KoreaJapanChinaI

32、ndia8%6420Southeast AsiaAustraliaSouth KoreaJapanChinaIndia15%129630Southeast AsiaAustraliaSouth KoreaJapanChinaIndia10%0102030Southeast AsiaAustraliaSouth KoreaJapanChinaIndiaBetterWorseAsia-Pacific Private Equity Report 20235decade,and the largest GDP slowdown in the region.Covid lockdowns contrib

33、uted to sluggish domestic consumption;Chinas Consumer Confidence Index dropped by 28%on average from April to November 2022,compared with the year-earlier average.Both India and Southeast Asia reported robust economic growth,but high inflation.Australias Consumer Price Index rose by a record 7.8%in

34、the fourth quarter of 2022.Japan and South Korea struggled with sharp currency depreciation in 202220%and 13%,respectivelyagainst the US dollar over the previous year.Investors,sensing a new era of slower growth,mounting inflation,and greater uncertainty,took time out to recalibrate their strategies

35、,recognizing that what worked well in the past may not be the right approach for 2023 and beyond.Lets review for a minute some of the macroeconomic and political factors that contributed most to market turbulence in 2022 and will affect the regions growth prospects in the coming year.Ukraine crisis.

36、Sanctions on Russian exports disrupted the global supply chain,especially in energy.Spiking commodity prices triggered global inflation.Tightening credit.The US Federal Reserve Bank increased its benchmark interest rates sharply in the second half of 2022 to battle inflation.Tighter liquidity prompt

37、ed a global capital outflow to the US,which led to currency depreciation and financial market instability in Asia-Pacific countries.Indias consumer and producer prices in 2022 rose sharply over the previous-year average,and manufacturers passed higher prices to consumers.The central banks of India a

38、nd South Korea accelerated interest rate increases to address inflation.In Australia,rising interest rates depressed the housing market.Sales of established homes and attached dwellings fell by 18%on average in the first nine months of 2022,compared with the same year-earlier period.Japans high debt

39、 ratio,combined with a significantly depreciated yen,could trigger financial instability.Sino-US decoupling.Worsening geopolitical tensions between China and the US led the US to impose additional trade restrictions on selected sectors,curbing Chinas growth and further depressing the sales of compan

40、ies relying on exports to the US and other Western markets.Loosening of Covid-19 restrictions.Lockdowns and other curbs to limit the spread of disease severely interrupted Chinas economy and disrupted supply chains and other economic activities throughout the region.Chinese fund managers top concern

41、s for the coming year are the short-and long-term impact of Covid policy,Sino-US decoupling,and the effect of those two factors on manufacturing activities and domestic consumption.Asia-Pacific Private Equity Report 20236 Labor shortage.A record level of job vacancies throughout the Asia-Pacific reg

42、ion curbed economic growth.Covid-19 and the structural shortage of skilled workers exacerbated the deficit.Australia was among the worst hit,with job vacancies on average 122%higher in 2022 than in 2020.Deals:a dramatic fallAfter two years of growth,Asia-Pacific deal value plunged in 2022 to$198 bil

43、lion,down 44%from a year earlier and 9%below the previous five-year average(see Figure 3).Deals were fewer in number and smaller in size.Depreciating currencies also diminished the average deal size in US dollars.The smaller average size of deals reduced deal value in AustraliaNew Zealand(48%),Japan

44、(28%),Southeast Asia(52%),and India(25%).By contrast,a sharp drop in deal volume depressed deal value year-on-year in Greater China(53%)and South Korea(39%).In Japan and Korea,exchange-rate fluctuations were responsible for 50%of the reduction in average deal size.During the first half of the year,d

45、eal activity was roughly on par with 2021,but as market uncertainties multiplied,deal value in the second half plunged 66%from the year-earlier period.A deteriorating macroeconomic outlook,higher financing costs,and worsening company performance all reduced GPs appetite for risk.Nearly one-third of

46、the respondents to our 2023 survey said macroeconomic conditions significantly or severely reduced deal activity.In China,that figure rose to 66%of GPs.Looking ahead,the pressure Figure 3:Asia-Pacific deal value fell by 44%;the number and average size of deals both declinedNotes:Excludes real estate

47、 deals;deal value includes deals with a transaction value greater than or equal to$10 million;deal volume reflects all deals(including those without a transaction value)Source:AVCJFactors affecting the change in total deal value,2022 vs.2021($B)2021 deal value$354BDeal volume impact75Average deal si

48、ze impact88103Exchange-rate impactOther factors222022 deal value19844%14Asia-Pacific Private Equity Report 2023748%+29%28%+36%39%+1%52%21%25%+23%Note:Excludes real estateSource:AVCJAsia-Pacific private equity investment value,by market($B)050100$150B53%38%Greater ChinaIndiaAustraliaNew ZealandJapanS

49、outh KoreaSoutheast Asia 2021 2022201721 averageFigure 4:Deal value in Greater China and Southeast Asia plummeted more than 50%in 2022on dealmaking isnt likely to dissipate soon.More than 50%of fund managers expect the negative trend to continue into 2024.Deal value fell sharply in every Asia-Pacifi

50、c market in 2022,with the declines ranging from 25%to 53%(see Figures 4 and 5).Greater Chinas share of the regions total deal value plummeted to 31%,a nine-year low,while India increased its share to 23%.Greater Chinas deal value shrank 53%more than any other Asia-Pacific marketas investors grappled

51、 with uncertainties related to the governments zero-Covid policy,political tensions,and tech regulatory crackdowns.The average deal size in AustraliaNew Zealand fell 57%.Growth deals continued to outpace buyouts in 2022,producing 54%of deal value,up from 50%in 2021(see Figure 6).However,the total va

52、lue of large growth deals of$200 million or more fell 45%in 2022,compared with the previous year.Deal value for this category of big-ticket transactions had risen nearly every year since 2014.Investors shrinking appetite for risk sharply reduced the number of large growth deals in Greater China and

53、India.Together,Greater China and India accounted for a$35 billion decline in total deal value for big-ticket growth deals in 2022.Another factor that depressed growth deals was the dramatic drop in the value of technology companies on public stock markets,which affected private markets,creating valu

54、ation mismatches and complicating or hindering the completion of mid-to late-stage tech deals.Asia-Pacific Private Equity Report 20238Figure 5:Greater Chinas share of deal value fell sharply;Indias share grew to 23%Notes:Average deal size is based on a simple average;excludes real estate Source:AVCJ

55、Share of Asia-Pacific private equity deal value020406080100%201216Greater ChinaIndiaAustraliaNew ZealandSoutheast AsiaSouth KoreaJapan$106B2017212172022198$109M133100Averagedeal size($M)Figure 6:Growth deals dominated the market again,representing more than 50%of deal valueNotes:Excludes real estate

56、;PIPE is private investment in public equity;start-up/early stage investments use financing for product development and initialmarketing,the company may be in the process of being organized or may have been in business for a short time,but hasnt sold its product commercially;growthincludes expansion

57、,growth,mezzanine,and pre-IPO capital deals;series are sorted with biggest on bottom based on 2022 sharesSource:AVCJShare of Asia-Pacific investment value,by deal type020406080100%202122change 2017$177B39%$112M$527M1819059%1383021916356%1013092020156%963182135450%1047922219854%88486Growth dealsshare

58、 of total valueAverage growthdeal size($M)Average buyoutdeal size($M)51%45%36%24%3%51%99%75%Buy-outGrowth deals$200M or moreGrowth deals$50M$200MGrowth deals$50M or lessStart-up/early stage PIPETurnaround/restructuringOtherAsia-Pacific Private Equity Report 20239By contrast,start-up and early-stage

59、deal value grew 3%year-on-year.The average size of buyouts and growth deals declined year-on-year to$486 million and$88 million,respectively(down 39%and 15%).The average size of growth deals dropped to the lowest level since 2015.In Asia-Pacific countries where growth deals dominate the market,Great

60、er Chinas share of growth deals rose to 74%of total China deal value,up from 67%a year earlier,while Indias share decreased to 67%of total India deal value,from 70%in 2021(see Figure 7).South Koreas share of growth deals fell to 46%from 53%,and Southeast Asias fell to 63%from 68%.In those countries

61、where buyouts dominate the market,AustraliaNew Zealands share of buyouts fell to 70%of deal value from 90%,as the number of megadeals declined,deal count dropped,and investors sought smaller buyouts.No 2022 deal in AustraliaNew Zealand was larger than$10 billion,and the average buyout size fell to a

62、bout$600 million.By contrast,a year earlier,the two countries produced two large deals over$10 billion(Sydney Airport Holdings$22 billion;AusNet Services$13 billion),and the average buyout deal size was$1.9 billion.Japans share of buyouts fell year-on-year to 76%from 85%.The country generated 21 buy

63、outs in 2022,and the average deal size fell to$750 million.By contrast,Japan generated 28 buyouts in 2021,with an average deal size of nearly$900 million.In all markets where buyouts dominate,the rising cost of deal financing was a key factor depressing the number of buyouts,as central banks tighten

64、ed credit,interest rates rose,and liquidity shrank.Figure 7:While growth deals led in deal value,buyouts remained more popular in AustraliaNew Zealand and JapanNotes:Excludes real estate;growth includes expansion,growth,mezzanine and pre-IPO capital;PIPE is private investment in public equitySource:

65、AVCJShare of Asia-Pacific investment value,by deal type,2022020406080100%Greater China$62BIndia45AustraliaNew Zealand38Japan21SouthKorea20South-eastAsia1370%9%21%76%34%21%Share of buyoutdeal value24%74%67%20%46%63%Share of growthdeal valueBuyoutGrowthStart-up/early stagePIPETurnaround andrestructuri

66、ngAsia-Pacific Private Equity Report 202310Carve-outs were again an important buyout theme in 2022,especially in Japan and South Korea,where a challenging economic environment prompted conglomerates to focus on their core businesses and sell noncore operations.Some of the largest carve-out deals in

67、2022 include the sale of Hitachi Transport System to KKR($6.1 billion),Olympus Corp.s sale of Evident Corp.to Bain Capital($3.1 billion),and SK Groups sale of SKC Plastics to Hahn&Co.($1.3 billion).Sector view:Internet and tech out in frontFor more than a decade,the Internet and tech sector has attr

68、acted the largest share of private equity capital in the Asia-Pacific region.However,its share of deal value dipped in 2022 to 33%from 41%the previous year(see Figure 8).That decline was due primarily to fewer and smaller deals in China and India.Internet and tech deal value for the two large tech-f

69、ocused markets fell$65 billion,compared with 2021.Within the Internet and tech sector,cloud services remained the largest subsector in deal value,but its share decreased to 41%,down from 55%a year earlier.Among cloud services,consumer tech businesses such as e-commerce and online services took the h

70、ardest hit,with deal value dropping by 68%and 76%,respectively,from the previous year.The traditional strongholds for Internet and tech dealsGreater China,India,and Southeast Asiaall experienced sharp declines.Greater Chinas Internet and tech deal value fell 62%year-on-year,Figure 8:The share of tec

71、hnology and cloud service deals fell to 33%;the share of advanced manufacturing and healthcare deals grewNotes:Other deals(includes those tagged as private equity,conglomerate,other industry,and no industry)arent labeled;excludes real estateSource:AVCJPercentage of Asia-Pacific deal value,by sector0

72、20406080100%2013141516171819202122Technology and cloud servicesAdvanced manufacturing and servicesEnergy and natural resourcesHealthcareRetailCommunications and mediaFinancial servicesConsumer productsHigher education and trainingOther industriesGovernment/public sectorServicesAsia-Pacific Private E

73、quity Report 202311led by the cloud services(down 88%)and software(59%)subsectors.Indias and Southeast Asias dropped by 52%and 49%,respectively.Advanced manufacturing and energy and resources were the only sectors that had more deals in 2022.That shift reflected investors preference for companies wi

74、th a low-risk profile that generate steady cash flow.At the same time,government demand for private capital investment to develop and upgrade critical infrastructure including utilities,telecommunications,and transportation remains strong,especially in Southeast Asia and India.For more than a decade

75、,the Internet and tech sector has attracted the largest share of private equity capital in the Asia-Pacific region.However,its share of deal value dipped in 2022 to 33%from 41%the previous year.Advanced manufacturings largest subsector,logistics and transport,represented 32%of deal value,down from 6

76、0%a year earlier.The sale of Hitachi Transport System for$6.1 billion was the largest deal.Several megadeals lifted the second-largest subsector,automotive and mobility,to 28%of deal value,more than doubling its relative share.They included the sale of GAC Aion($2.5 billion)and Sunwoda Electric Vehi

77、cle Battery($1.2 billion).In the energy and natural resources sector,investments in utilities and renewables made up 60%of deal value,reflecting the rise of environmental,social,and corporate governance(ESG)considerations as an investment priority.The number of utilities and renewables deals rose 47

78、%year-on-year,with an investment in Macquarie Groups offshore wind unit exceeding$1 billion.The growing embrace of ESG considerations has boosted interest in renewable energy companies in particular.Half of the GPs we surveyed plan to significantly increase their effort and focus on ESG in the next

79、three to five years,up from 30%three year ago.Competition eases Tough market conditions pushed some investors to the sidelines in 2022.The number of active investors in the Asia-Pacific region fell 2%year-on-year,the first drop since 2015(see Figure 9).The largest decline was in the number of instit

80、utional investors,which fell 15%.Deal value remained relatively concentrated among top funds.The share of deal value contributed by the regions top 20 funds increased slightly to 32%.Aided by the merger of two large funds,Baring Asia-Pacific Private Equity Report 202312Private Equity Asia and EQT,gl

81、obal GPs continue to expand their presence in the region,and big funds often have an edge identifying deals and raising capital.Global GPs and domestic GPs continue to be the largest investor groups,based on deal value.The share of corporate investors rose slightly in 2022(see Figure 10).Multiples s

82、lideDeal multiplesthe ratio of enterprise value to EBIDTAdeclined to 12 from 13.1 a year earlier (see Figure 11).Several factors contributed to the reversal,the first since 2019,when multiples fell to 10.The rerating of companies listed on public markets typically has a knock-on effect,diminishing t

83、he multiples of portfolio companies.A second factor is deteriorating company performance in a tougher economic landscape.The multiples of growth companies also may decline as investors in an uncertain market seek more defensive investments,such as companies with strong cash flow and dependable profi

84、ts.Finally,the Internet and tech sector,which typically contributes to high valuations,shrank in 2022 as a share of overall deal value.If the conditionsmacroeconomic uncertainty,poor company performance,and a decline in deal activitythat prevailed in 2022 persist,valuations may continue to contract

85、as fund managers adopt a wait-and-see attitude.Sixty-nine percent of the fund managers we surveyed expect valuations to continue declining through 2024.Figure 9:The number of active investors declined 2%;the top 20 funds produced nearly one-third of deal valueSource:AVCJNumber of active firms invest

86、ing in the Asia-Pacific PE market18%CAGR2016212%Change20212220151,17630%161,44738%171,54837%181,82733%191,95535%202,35831%213,36029%223,27932%Top 20fundsshare Asia-Pacific Private Equity Report 202313Figure 10:The most active Asia-Pacific investors were global and domestic GPsNote:The sum of percent

87、ages for each year is greater than 100%because many deals have more than one investor groupSource:AVCJPercentage of Asia-Pacific deals involving specific investor groups,weighted by valueGlobal GPsRegional GPsDomestic GPsGovernmentaffiliatesInstitutionalinvestors Corporateinvestors202120222020201920

88、1820170255075%Figure 11:Asia-Pacific deal multiples declined in 2022Notes:EV is enterprise value;equity contribution includes contributed equity and rollover equity;based on pro forma trailing EBITDA;excludes multiples less than 1 or greater than 100Source:S&P Capital IQMedian EV/EBITDA multiple on

89、Asia-Pacific private equity-backed M&A transactions20108.4x119.4128.8138.6149.71511.31611.81713.71814.51910.02011.62113.12212.0Asia-Pacific Private Equity Report 202314Exits plummetFollowing a record year for Asia-Pacific exits in 2021,exit value plunged back to earth,falling 33%year-on-year to$132

90、billion,1%below the previous five-year average(see Figure 12).Three key factors deterred GPs from selling:a significant rerating of public market valuations,fewer avenues for exits given the decline in IPOs,and deteriorating portfolio performance.The average exit value declined 14%to$256 million in

91、2022,down 8%from the previous five-year average.Nearly 50%of the GPs we surveyed said the 2022 Asia-Pacific exit environment was“far more challenging,”while 82%applied that label to Greater Chinas exit market.The top three reasons GPs cited for suboptimal exit opportunities were IPO market underperf

92、ormance(73%),macroeconomic softness(60%),and multiple compression(50%).Initial public offerings(IPOs)remained the primary channel of exit,accounting for 45%of the exit market,down slightly from the previous year.Trade sales represented 33%,unchanged from 2021.And secondary deals grew to 22%of the ma

93、rket,up from 19%a year earlier.Exit value declined sharply in most Asia-Pacific markets,except for AustraliaNew Zealand (see Figure 13.)Buoyed by nine blockbuster exits worth more than$1 billion,exit value in these two countries rose 43%.Those blockbuster exits included six secondary deals and three

94、 trade deals.Figure 12:Asia-Pacific exit value in 2022 dropped by one-thirdNote:Excludes real estateSource:AVCJAsia-Pacific private equity exit value($B)0200400600800136014137151051713018158199221199221322011$90B1283161092091Asia-PacificPE exit countExit countSecondaryTradeIPOAsia-Pacific Private Eq

95、uity Report 202315Figure 13:Exit value in 2022 declined in all the regions except AustraliaNew ZealandNote:Excludes real estate Source:AVCJAsia-Pacific private equity exit value,by market($B)32%+12%66%47%46%39%73%50%+43%+188%05025$75B35%13%Greater ChinaAustraliaNew ZealandIndiaSouth KoreaSoutheast A

96、siaJapan 2021 2022201721 averageRenewable energy-related sales accounted for 60%of deal value for transactions over$1 billion in Australia and New Zealand.The Ukraine crisis and growing commitment to ESG fueled strong investor interest in renewable energy companies in 2022.South Korea and Japan reco

97、rded the largest declines in exit value.Currency depreciation undercut companies performance and diminished GPs interest in exits.A sluggish stock market added to the exit gloom.Koreas KOSPI fell almost 20%in 2022.In Greater China,exit value slumped to the lowest level in three years.Exit value decr

98、eased 32%in India from 2021.Greater Chinas share of exit value dropped to 44%,compared with a previous five-year average of 50%.Indias share remained consistent at 18%.South Korea,Southeast Asia,and Japan all lost share in 2022,while AustraliaNew Zealand increased its share to 24%(see Figure 14).Pub

99、lic stock market listings remained the top channel for exit.But a gloomy and uncertain economy overshadowed IPOs.The exit value for IPOs decreased by 38%year-on-year.China accounted for 89%of the regions IPO exit value,the largest share since 2012.India ranked No.2,with a share of only 6%.The US eas

100、ed restrictions imposed in 2021 on Chinese IPOs on US exchanges,paving the way for 18 Chinese companies to list in the US in 2022.However,the viability of listing Chinese companies on US exchanges remains uncertain and vulnerable to geopolitical tensions.Asia-Pacific Private Equity Report 202316The

101、Internet and tech sector is the largest in terms of Asia-Pacific IPO exit value and has held that position since 2017.In 2022,it accounted for 42%share,down from 48%year-on-year.Healthcare and advanced manufacturing were No.2 and No.3 in IPO exit value,with 19%and 18%,respectively,both up from 15%a

102、year earlier.Fund-raising plungesAfter a sharp rise in 2021,global fund-raising activity declined 8%in 2022(see Figure 15).The share of Asia-Pacific-focused funds fell to 10%in 2022 from 16%a year earlier.By comparison,Asia-Pacific fund-raising slumped even more dramatically.Asia-Pacific-focused-fun

103、ds raised$105 billion in 2022,down 43%year-on-year and 70%below their 2016 peak(see Figure 16).Four out of five GPs said 2022 fund-raising was“very challenging”or“somewhat more challenging”than in 2021,according to our survey.More than three-quarters said fund-raising in China was“very challenging,”

104、and 56%characterized Southeast Asias environment the same way.Funds of all sizes and levels of experience needed more time to close funds in 2022(see Figure 17).The increase in average time on the road for Asia-Pacific-focused funds,especially smaller and first-time funds,underscored limited partner

105、s(LPs)preference for funds with an established track record.Funds that had the least difficulty closing were those with differentiated strategies and realistic expectations.Figure 14:China still dominates Asia-Pacific exit value;AustraliaNew Zealand outpaced India to rank No.2Note:Excludes real esta

106、te Source:AVCJShare of Asia-Pacific private equity exit value,by region020406080100%201216IndiaJapanSouth KoreaAustraliaNew ZealandSoutheast Asia$99B2017211342022132$184M238256Greater ChinaAverageexit size($M)Asia-Pacific Private Equity Report 202317Figure 15:Global fund-raising fell 8%in 2022;the s

107、hare of Asia-Pacific-focused funds fell to 10%Figure 16:Asia-Pacific fund-raising contracted sharply in 2022,especially for funds focused on Greater ChinaNote:Excludes real estateSource:PreqinGlobal private equity closed funds,by final size and year of final close($B)(8%)2016$951B37%1798135%181,0142

108、8%191,06223%201,05517%211,16716%221,06910%Share ofAsia-Pacific-focused fundsAsia-Pacific-focusedRest of the worldNote:Excludes real estateSource:PreqinAsia-Pacific-focused private equity capital raised,by final year of close($B)2016$352B1734718 28319249201792118422105(43%)Greater China(other currenc

109、y)Pan-Asia-PacificIndiaOther country-specificGreater China(renminbi-denominated)Asia-Pacific Private Equity Report 202318Three key factors contributed to a challenging fund-raising environment.The first was a dismal economic outlook that includes rising inflation and a strong US dollar,which reduced

110、 LPs appetite for risk.GPs we surveyed said the most challenging aspect of fund-raising was LPs decision to reduce their relative allocations for the Asia-Pacific region.A second factor was the reduced distribution of capital back to LPs,resulting from fewer exits and depressed IPO markets throughou

111、t the region.Third,many LPs have allocation restrictions or caps on the share of funds allocated to private equity.With public markets down significantly,private equity holdings account for a higher percentage of LP portfolios,limiting their ability to allocate new funds to private equity.Fund-raisi

112、ng declined in most Asia-Pacific markets in 2022,with the sharpest drop affecting funds focused on Greater China.Bucking that trend,AustraliaNew Zealand recorded an 80%increase in private equity capital raised.Greater Chinas share of total Asia-Pacific funds raised shrunk to 24%,a 15-year low.The sh

113、are of private equity raised by AustraliaNew Zealand,Japan,and India rose to 7%,6%,and 5%,respectively.The increase in share for these three countries reflects greater LP capital allocation to alternative markets following the flight of foreign capital from China.By contrast,private equity raised by

114、 pan-Asia-Pacific funds increased 44%year-on-year.The share of pan-Asia-Pacific funds rose to 52%,a 22-year high.Instead of betting on specific country funds,Figure 17:GPs needed more time to close funds in 2022,especially first-time fundsNotes:Excludes real estate;large,experienced funds exclude fi

115、rst-time funds and include funds with more than$1 billion in assetsSource:PreqinTime to close(months)201921 average19202230201921 average13202219201921 average13202216Large,experiencedfundsSmaller,experiencedfundsFirst-time fundsAsia-Pacific Private Equity Report 202319LPs chose to reduce risk by be

116、tting on the region.Bain Capital Special Situations Asia II fund raised$2.1 billion,and KKRs Asia Credit Opportunities Fund raised$1.1 billion.In a key shift,Greater China-focused funds raised only$25 billion,a 77%decline from the previous year.That contraction pushed Greater Chinas share of Asia-Pa

117、cific-focused funds to 24%,down from 58%a year earlier.One reason was foreign LPs sharply diminished interest in China given the countrys uncertain economic outlook and US-China geopolitical tensions(see Figure 18).Regulations limiting foreign investment also curbed investor interest in Greater Chin

118、a-focused funds.The latest version of Chinas Foreign Investment Negative List went into effect on January 1,2022.Although the list was shorter than a previous draft,it still strictly regulates more than 30 products or subsectors(including critical infrastructure,airports,telecommunications,and rare

119、earth mining).The number of Asia-Pacific-focused funds closed in 2022 fell to 352,down 59%from the previous year.But the average size of closed funds increased 40%year-on-year(see Figure 19).And a greater percentage of funds managed to raise more than their target.The final size of new funds raised

120、exceeded the target size by an average 21%,up from 2%in 2021.Funds grew larger,in part because of the increase in midsize($500 million to$1 billion)and large funds($1 billion to$3 billion)closed in 2022.This trend underscores LPs flight-to-quality as they double down on funds with established track

121、records in a competitive fund-raising environment.Figure 18:Capital raised by Greater China-focused funds in 2022 decreased 77%Notes:Amounts shown are for funds focused only on Greater China;excludes real estateSource:PreqinGreater China-focused private equity capital raised,by final year of close($

122、B)2017$290B18208191782011321107222577%Second halfFirst halfAsia-Pacific Private Equity Report 202320The share of midsize funds of total funds raised increased to 19%in 2022 from 16%a year earlier,while the share of large funds rose to 29%from 20%.Two Asia-Pacific megafunds($5 billion or larger)close

123、d in 2022:Baring Private Equity Asia Fund VIII($11.2 billion)and Blackstone Capital Partners Asia II($11 billion,including a$4.6 billion contribution from Blackstones global funds).Blackstone closed its Asia II fund in 15 months,quicker than the average 16 months needed for large,experienced funds(o

124、ver$1 billion),which underscored LPs preference for established funds with a solid performance track record.Dry powder,or total unspent private equity capital,rose to a new high of$676 billion,a 20%increase over the previous year(see Figure 20).The buildup of dry powder was most pronounced in two ty

125、pes of funds.The share of unspent private equity capital in venture funds and fund of funds increased to 30%and 31%of Asia-Pacific dry powder,respectively,in 2022 from 26%and 27%a year earlier.Fund of funds dry powder has grown at the fastest pace since 2015.Dry powder at buyout funds and growth fun

126、ds decreased to$99 billion and$95 billion,respectively(15%and 14%of total dry powder),down from$109 billion and$99 billion in the previous year.GPs are under pressure to deploy capital,but the uncertain macroeconomic outlook and intense competition for high-quality deals continue to limit investment

127、s.Figure 19:Significantly fewer funds closed in 2022,but the average size grew,and GPs exceeded their targetsNotes:Funds closed include those focused only on Asia-Pacific;excludes real estateSource:PreqinNumber of Asia-Pacific-focusedfunds closedAverage fund size of closedAsia-Pacific-focused funds(

128、$M)Final size vs.target size for closed Asia-Pacific-focused funds20181,604191,241201,02221864223522018$176M19201201752121222297 201811%196%206%212%2221%Asia-Pacific Private Equity Report 202321Figure 20:Dry powder grew to an estimated$676 billion in 2022,setting another recordNotes:Other includes d

129、istressed and mezzanine funds and excludes real estate funds;number of years of future investment based on estimated growth of thePE market(factoring debt)Sources:Preqin;AVCJUnspent private equity capital at Asia-Pacific-focused funds at year-end($B)GrowthVentureFund of fundsInfrastructureOtherBuyou

130、t161831.1172711.5183311.8193731.9205202.5215642.5226762.92015$148B1.1Numberof yearsof futureinvestment 11%14%33%51%7%32%24%CAGR201522Returns still risingDespite the sharp drop in dealmaking,exits,and fund-raising,Asia-Pacific PE returns rose to a new high of a 15.0%median net internal rate of return

131、,from 13.9%a year earlier.Top-quartile funds continued to deliver robust returns well above expectations,at 25%median net IRR(see Figure 21).But a turning point may be ahead.More than one-quarter of Asia-Pacific GPs we surveyed expect their net returns to decline in the coming three to five years,du

132、e to increasing competition,weakening portfolio performance,fewer exit options,and declining multiples in an uncertain macroenvironment.Asia-Pacific funds net distribution to LPs in 2022 remained positive in the first three quarters of 2022(see Figure 22).However,the return on public equity declined

133、 significantly in 2022,according to Burgiss proprietary market index MSCI Asia PME.Private equity continued to outperform public markets across 5-,10-,and 20-year time periods.Looking ahead,49%of the GPs we surveyed said topline growth will be the most important factor for generating strong returns

134、in the next five years,up from 46%five years ago(see Figure 23).Cost improvement will also be critical,given expectations for higher inflation.Our survey showed 23%of GPs expect cost improvement to be the No.1 factor affecting returns,up from 5%five years agothe biggest change in sentiment on this q

135、uestion.GPs said multiple expansion and leverage are now less important than five years ago.Asia-Pacific Private Equity Report 202322Figure 21:Asia-Pacific returns remained strong in 2022Notes:Includes latest performance data available on Preqin(including December 2022);vintage year refers to year o

136、f initial investment;excludes real estate andfunds with no value or no available IRR;the chart for net IRR by vintage is as of January 6,2022Source:PreqinNet internal rate of return for Asia-Pacific-focusedfunds,all vintagesNet internal rate of return for Asia-Pacific-focusedfunds,by vintage0102030%

137、2016171819202122As of year-endVintage year0102030%2007 080910111213141615Top-quartilefundsMedianfundsThird-quartilefundsTop-quartilefundsMedianfundsThird-quartilefundsFigure 22:LPs remained cash-positive in the third quarter of 2022;private equity continues to outperform public marketsNotes:Data for

138、 Asia-Pacific calculated in US dollars;PME is a proprietary private-to-public comparison from Burgiss that evaluates what performance would havebeen had the dollars invested in private equity been invested in public markets insteadSource:Burgiss(as of December 20,2022)Cash flow for Asia-Pacific buyo

139、ut andgrowth funds($B)Asia-Pacific private equity vs.public market59%2%1011%8%2011%5%Investment horizon(years)End-to-end pooled net internal rate of return(as of September 2022)2515551525$35B2010 1112131415161718192021 Q1Q32022 Net cash flowsContributionsDistributionsMSCI Asia PMEAsia-Pacific buyout

140、 and growth funds Asia-Pacific Private Equity Report 202323Riding out the stormLooking back in a couple of years,2022 may seem an obvious turning point for Asia-Pacific private equity investors.After a decade of vigorous growth and two years of resilience in the face of a shifting global economy,mos

141、t markets succumbed to a worsening macroeconomic storm,rising geopolitical tensions,and ongoing disruptions related to the pandemic.The decade ahead will be less stable and less certain than the previous one.But change brings new opportunities.Successful funds already are adapting their investment s

142、trategies to a new era and building the skills to improve portfolio performance.Figure 23:Asia-Pacific GPs expect cost efficiencies to play a bigger role in creating value for exitsNote:The above view captures the share of the top-ranked factorSource:2023 APEG Survey(n=131)For deals exited,what was

143、the biggest driver of private equity returns?How do you see thingschanging over time?02040301050%Share of respondentsExternalInternalMultiple expansionLeverageTopline growthCost improvementand capital efficiencyM&AFive years from nowNowFive years ago24Smart investing in a downturn The macroenvironme

144、nt for private equity investors in the Asia-Pacific region this year remains difficult and uncertain.But economic downturns also create an opportunity to outperform.The best PE funds follow a few key strategies in tough times.The first is identifying recession-proof sectors and the top-performing co

145、mpanies within those sectors.Next,these funds use scenario planning as a vital tool to understand the range of potential outcomes for targets and portfolio companies.Finally,fund managers roll up their sleeves and help improve portfolio performance.Although the Asia-Pacific region is one large,dynam

146、ic market,macroeconomic uncertainty affects each country differently.Before discussing strategies,lets first take a high-level view of country-specific outlooks and promising investment opportunities.China The countrys growth rate is likely to accelerate in 2023 as it emerges from a period of Covid-

147、related setbacks and key economic sectors rebound.Despite a strong government commitment to revival,the size of any recovery remains uncertain.In the wake of the US-China decoupling,China is focusing on developing the economic potential of its huge internal market to power consumption.The government

148、 aims to support key industry sectors,lower barriers for investors,and seek regional trade pacts.As it implements that strategy,consumer confidence and export-based industries are likely to recover.India The countrys large and relatively young population and a growing middle class help increase Indi

149、as resilience against global economic headwinds.Key investment opportunities include infrastructure of all kinds,especially digital infrastructure.The governments Gati Shakti plan seeks to overcome long-standing obstacles to integrating and coordinating digital investments nationwide.Education,healt

150、hcare,and other services urgently Asia-Pacific Private Equity Report 202325need digital investment,especially in less-developed cities.Rising Internet use also is fueling demand for better digital infrastructure.Japan A weakening yen is good news for Japanese exporters and multinational Japanese fir

151、ms;overseas sales will generate a higher yen return.At the same time,a weaker yen allows companies to price strategically to capture market share.Better corporate governance and increasing acceptance of private equity financing have improved the environment for PE investing in Japan.As a result,the

152、number of carve-outs,corporate restructurings,succession deals,and activist interventions are rising.South Korea Large conglomerates are creating robust demand for private equity through portfolio restructuring,leadership succession,and global expansion.At the same time,many PE funds are seeking exi

153、ts through secondary sales to other funds.A sharp depreciation of the Korean won creates a window for US dollar-dominated funds to pick up acquisitions at attractive prices.Southeast Asia The regions population of more than 600 million and rising income levels support steady economic growth.Domestic

154、 markets such as Indonesia are sizable enough to support large enterprises.Investments in economic development and a steady increase in disposable income will fuel strong domestic consumption.Rising geopolitical tensions,increased labor costs in China,and disruption to Chinas domestic supply chain h

155、ave made Southeast Asia,especially Vietnam,an attractive alternative location for global supply chain nodes and manufacturing.Australia Labor shortages are limiting growth in sectors with strong demand,such as healthcare(e.g.,hospitals,aged care,diagnostic imaging,primary care)and early childhood ed

156、ucation.But companies that improve workforce productivity,for example,in business and industrial services,will be highly attractive as deal activity recovers.The Covid-19 pandemic and an aging population create opportunities in healthcare,especially in innovative,flexible,and digitalized healthcare

157、service models.The government is also investing in services for an aging society,including at-home care and residential care homes.Asia-Pacific Private Equity Report 202326Pre-deal strategiesEven in a downturn,companies can accelerate growth and generate superior returns(see Figure 24).The key for P

158、E funds is to identify the right sectors and potential winners in those sectors.Above all,top-performing funds incorporate scenario planning into the diligence process.In the current macroeconomic climate,attractive sectors in the Asia-Pacific region include healthcare,business services,infrastructu

159、re,and technology(see Figure 25).Healthcare.Medical services and pharmaceuticals have been resistant to recessions historically,and structural factors in the Asia-Pacific region,such as an aging population and increasing affluence,continue to support growth in private healthcare services in countrie

160、s like China and Japan.In Southeast Asia,rising levels of income and broader consumer health awareness also are stimulating the expansion of private healthcare businesses.Indias pharmaceutical services sector will benefit from the China-US decoupling as global pharma companies shift contract researc

161、h,development,and manufacturing from China to India.Business services.As companies confront labor shortages,many are turning to outsourcing.Thats creating investment opportunities in business services such as business process outsourcing,facilities management,and industrial and technology services.A

162、t the same time,the Ukraine crisis has increased transportation costs and disrupted supply chains,boosting demand for distribution and logistics,such as marine services.Figure 24:Successful companies use a downturn to accelerate growthNotes:Data is global or all industries(excludes insurance);chart

163、compares indexed weighted average of companies 2020 revenue and profit for sustained valuecreators(SVCs)and non-SVCs per a 2020 analysis over the last decade;EBIT used for all industries except banking,which used EBTSources:S&P Capital IQ;Bain analysisGrowth in nominal EBIT(indexed to 2007)020040060

164、0200708091011121314151617181920Losers0.1%Winners14.4%CAGR200720Tookopportunities14.3%Reacted late1.4%Accelerated growth15.6%Struggled to bounce0.1%14%15%Covid19After disruptionFinancial crisisAsia-Pacific Private Equity Report 202327Infrastructure.Market trends in several Asia-Pacific countries are

165、creating attractive investment opportunities in infrastructure.Aging infrastructure,government privatization programs in energy and transportation,and a stable regulatory regime,for example,are encouraging infrastructure investments in Australia and South Korea.The ongoing divestment of infrastructu

166、re assets by Koreas chaebol is also contributing to deal flow.Infrastructure PE deals in both countries have a track record of strong returns.In all Asia-Pacific markets,the energy transition is creating infrastructure investment opportunities in generation assets such as solar or wind farms as well

167、 as logistics,including ports and energy storage.Similarly,government plans to improve and extend digital infrastructure are boosting investment in data centers and 5G networks.Technology.Asia-Pacific technology and telecommunications companies based outside of China may also benefit from shifting g

168、eopolitical winds.The US has already restricted the import of semiconductors,artificial intelligence,big data subsectors,and telecom equipment from China.If restrictions on tech exports from China continue,tech companies in other Asia-Pacific regions are likely to gain a share of that business,espec

169、ially semiconductor manufacturers in Japan and South Korea.Spot the winnersOnce leading PE firms identify the sectors likely to thrive in a downturn,they choose the companies poised to outperform in their sector.That combination ensures high-quality investments that should Figure 25:In the current m

170、acroeconomic climate,a companys investment attractiveness will vary more by sector and regionSource:Bain&CompanyGreater ChinaJapanSouth KoreaIndiaAustraliaSoutheast AsiaLowHighAttractiveness for investorsComputer,technology,and softwareConsumer productsand retailFinancial servicesHealthcareIndustria

171、l goodsand servicesInfrastructureTelecommunicationsBusiness servicesAsia-Pacific Private Equity Report 202328outperform through the economic cycle.The good news is that these winners may be available at more attractive prices during a downturn.Of course,assessing a targets business fundamentals is e

172、ven more important in a turbulent economy.Two-thirds(66%)of Asia-Pacific GPs say solid business fundamentals and good cash flow are their top criteria in selecting deals now.Successful funds also use a set of winning factors and warning beacons to ferret out potential sources of superior outcomes.Ba

173、in analysis shows PE deals that outperform have at least one winning factor to counterbalance possible negative macroeconomic developments.These include rapid market growth;organic sales growth in existing stores and rising market share;and expansion into new geographies,products,channels,or adjacen

174、t markets.Other winning factors are acquisitions that make a target more competitive,identifiable acquirers that ensure a viable exit strategy,and margin improvement of more than 20%during a five-year holding period.Once leading PE firms identify the sectors likely to thrive in a downturn,they choos

175、e the companies poised to outperform in their sector.That combination ensures high-quality investments that should outperform through the economic cycle.By contrast,PE deals that significantly underperform investors expectations typically possess one or more warning factors.These include an unfavora

176、ble change in competitive dynamics,unforeseen or underestimated disruption,and a misunderstood penetration curve.Other red flags are failure to execute a merger or acquisition and unrealistic forecasts for margin improvement.Scenario planningIn a tough macroeconomic climate,top-performing funds use

177、the due diligence process to assess how a variety of developments could affect a deal,operationally and financially.Inflation,for example,is one critical element in scenario planning.By including a range of inflation rates in market forecasts,investors can better understand how rising inflation can

178、undercut growth.When inflation is rising,successful funds follow a few key guidelines during due diligence.They start by pressure testing a companys ability to pass inflation costs to customers and suppliers.Next,they evaluate how inflation might influence a targets cost structure and how long infla

179、tion pressure might last.Just as important,they assess the implications of an increase in working capital and capital spending,a higher cost of capital,and tighter liquidity for cash flow.Asia-Pacific Private Equity Report 202329Take the case of a large global PE fund preparing a diligence on a make

180、r of precision microscopes that has key customers in highly cyclical industries such as oil and gas and semiconductors.Given its customer base,the targets performance is highly dependent on the business cycles of those end markets,which in turn are affected by the macroeconomic environment.A key ste

181、p in the funds diligence was to model potential demand scenarios for each of the industries the target serves and evaluate the implications on market and revenue forecasts.For the oil and gas end market,the diligence team defined potential scenarios for oil demand(base case,low demand,and high deman

182、d),taking into account macroeconomic factors such as global GDP growth and industry-specific factors including the growing number of electric vehicles,demand from plastic production,and plastics recycling.Based on the different scenarios for oil demand,the team calculated three corresponding market

183、forecasts(see Figure 26).That enabled the target to create action plans tailored to low-,medium-,and high-growth scenarios,and to understand the companys best performance potential in each one.Post-deal strategies In turbulent times,leading fund managers revisit their portfolio plans.A poor macroeco

184、nomic climate may make it prudent to delay exits,for example.Companies suffering from declining multiples or deteriorating business performance are likely to generate lower-than-expected returns.In such a Figure 26:Different scenarios for oil demand shaped forecasts of a target companys market sizeS

185、ources:International Energy Agency;World Energy Outlook 2020;Bain analysisOil-demand scenarios Corresponding market-size scenariosTotal oil demand(Mbbl/d)Market size for global maker of microscopes(indexed to 100 in 2013)080120160200201819202122232425025,00050,00075,000100,000125,0002010152025303540

186、ForecastsHighdemandBasecaseLowdemandHighdemandBasecaseLowdemandAsia-Pacific Private Equity Report 202330climate,reassessing whether to sell or hold mature assets and creating a clear path with milestones will help achieve targeted returns.Top-performing funds navigate periods of economic uncertainty

187、 by improving the performance of their portfolio companies.Value creation becomes paramount.Leaders know that winning companies with the right strategy can outperform in a downturn,increasing their edge over rivals.Funds that hold certain assets longer than anticipated strive to boost their value in

188、 the 18 to 36 months before exit.Good planning starts with a realistic assessment of a portfolio companys starting position.That includes its strategic position based on market share,customer loyalty,and other metrics,and its financial position,defined by balance sheet health,cost position,and reces

189、sion sensitivity(see Figure 27).As fund managers know,many actions can improve a companys performance,including cost reduction,investment,increasing revenue,shifting resources to core business activities,enhancing digital capability,and bold strategic moves.The importance of any one action depends o

190、n the companys industry,strategy,and financial position.Successful funds analyze the potential for value creation to determine which actions will work best for a specific company.In our experience,improving a companys cost position is highly effective for a range of situations(see Figure 28).Macroec

191、onomic developments will continue to pose a greater-than-usual risk to company performance for the next 12 months and maybe longer.For investors,the challenge is to identify and focus on Figure 27:Leading funds assess portfolio companies by their strategic and financial position in the marketSource:

192、Bain&CompanyStrategic positionMarket sharePlay defensePare back noncore products andprocesses;focus on core strengthGo big or go homeSell all or parts of the business;launch aggressive cost transformationPlay offenseIncrease market share and revenues;aim for market leadershipInvest to growRedefine t

193、he business around a defensible core;reset the cost base and balance sheet Financial strength vs.peersMargins/unit-cost positionRecession sensitivityBalance sheet/liquidityProduct petitorsCustomer loyaltyIndustry exposure torecession or disruptionStrongWeakWeakStrongAsia-Pacific Private Equity Repor

194、t 202331the few things that matter most for portfolio performance.Successful funds know that scenario planning is vital in uncertain times.The range of potential outcomes is much wider today than most businesses anticipate.Leaders are taking a fresh look at their portfolio companies to see if the cu

195、rrent macroeconomic climate warrants a shift in strategy.Almost certainly,some assumptions that originally underpinned a value creation plan no longer hold true.When the economic outlook darkens,the best funds redouble their efforts to improve portfolio company performance.They monitor and manage ca

196、sh on the balance sheet,grow the top line through commercial excellence,and increase margins by managing costs and implementing smart pricing strategies.That helps these winners prosper in challenging times.Figure 28:Successful funds trace key metrics of value creationSource:Bain&CompanyIndustry sen

197、sitivityLessStrongStrongWeakStrongWeakStrongWeakStrongWeakStrongWeakWeakMoreImprove cost performanceTightly manage cash,liquidity,and debtStrategic positionFinancial positionFull speedaheadPlayoffenseInvestto growRide thewaveTake noprisonersManageriskBecautiousGo big orgo home1Reduce costs andinvest

198、ments2Increaserevenue3Shiftresourcesto corebusinessactivities4Transformdigitally5Conductbold movesDouble down on digitalizationPursue M&A,partnerships,and exitsTurbocharge salesSet prices to help increasemargins or gain market shareClarify strategy:choosewhere and how to winImprove loyaltyof core cu

199、stomersStrengthen the organizationDivest noncore assets32Portfolio companies:fit for the storm During the past decade,strong topline growth has helped power impressive returns for private equity funds in the Asia-Pacific region.But an economic downturn is looming.Some fund managers have navigated th

200、rough tough times in the past,particularly industry veterans who had to steer portfolios through the global financial crisis in 20082009.The initial outbreak of Covid-19 also prompted fund managers to work more closely with portfolio companies to bolster their performance.But most private equity inv

201、estors in the region are facing their first sustained downturn,including mounting pressure on deal economics.Slower macroeconomic growth already is curbing portfolio company revenues.And for many deals,exit multiples in the coming years are likely to be lower than they were at buy-in.The good news i

202、s that the global PE industry has developed the skills to bring costs down and improve margins when macroeconomic headwinds blow strong.The best-performing funds are already taking a more hands-on approach with their portfolios to manage costs,improve margins,and bolster returns.Slower macroeconomic

203、 growth already is curbing portfolio company revenues.And for many deals,exit multiples in the coming years are likely to be lower than they were at buy-in.A recent Bain survey shows GPs expect cost improvement to become much more critical to performance.More than half(54%)say it will be one of the

204、biggest factors influencing deal returns over the next five years,compared with 23%five years ago.However,reducing costs is tough.Its less reliable than topline growth targets as a source of value creation.Two-thirds of the investors we surveyed said they meet topline targets on many or most deals,b

205、ut only half of these investors do so for margins(see Figure 29).As GPs seek to manage costs,many plan to take a more active role in their portfolio companies.While most funds have worked with portfolio leadership teams on cost reduction to some extent,Asia-Pacific Private Equity Report 202333Figure

206、 29:Asia-Pacific private equity deals are more likely to fall short on margins than on topline growth targetsSource:Bain&Company Asia-Pacific Private Equity Report survey,2023(n=131)How often did you achieve targeted topline growth and margin expansion on exits in the past two to three years?0204060

207、80100%Topline growth targets achievedIn many situationsIn some situationsIn most situationsNot that often Very rarelyMargin expansion targets achievedIn many situationsIn some situationsIn most situationsNot that oftenVery rarelyMore than 80%of the time50%80%of the time25%50%of the time5%25%of the t

208、ime05%of the timetheir engagement has tended to be at a more strategic level,with less than a third saying theyve deployed teams in recent years to work intensively on some cost initiatives with the portfolio company management.Now,46%of the funds we surveyed are planning to take a very active role,

209、up from 27%in the past two to three years(see Figure 30).Successful GPs start thinking about performance improvement before they buy an asset.They use the due diligence exercise to identify areas for cost reduction and efficiency gains.In some cases,funds may build an investment thesis around a cost

210、-led transformation of the company,but more often,they focus on reducing costs in one or two functional areas such as corporate support,procurement,supply chain,manufacturing,or service design and operations.With inflation at elevated levels across the region and supply chain disruption a continual

211、risk,senior executives are focusing much of their attention on procurement,corporate and overhead costs,and supply chain efficiency(see Figure 31).Below,we take a close look at how leaders are making significant gains in each of these areas.Procurement For every private equity investor,inflation has

212、 taken a toll on performance,raising input costs and squeezing gross margins.While optimizing procurement can cut costs significantly,leaders carefully Asia-Pacific Private Equity Report 202334Figure 30:GPs are aiming to get more involved in cost-reduction initiativesSource:Bain&Company Asia-Pacific

213、 Private Equity Report survey,2023(n=131)How actively do you work with portfolio companies on cost reduction?020406080100%Past two to three yearsVery activeActiveNot activeLimitedNext two to three yearsVery active Limited Not active Active Portfolio team working with companieson extended projects as

214、 a prioritySome strategic initiatives workingwith managementSome board-level guidanceNot a focus areaFigure 31:To improve portfolio company performance,GPs are targeting corporate support and procurementNote:Respondents could choose as many as three optionsSource:Bain&Company Asia-Pacific Private Eq

215、uity Report survey,2023(n=131)Where do you see the greatest potential for cost reduction and performance improvement?Manufacturing17Service cost29Supply chain40Procurement49Corporate support,overhead74%Asia-Pacific Private Equity Report 202335consider how changes might affect supply chain risk and t

216、he customer experience.For example,when a PE-owned electronics company in Japan faced rising input costs on key components such as printed circuit boards and capacitorsas well as ongoing supply chain disruptions from Covid-19the leadership team decided to assess the potential for savings from renego

217、tiating supplier contracts.Using an analytical approach based on benchmarking and clean-sheet costing,a company can break manufacturing cost into its component parts and estimate a fair cost as a basis for negotiating with suppliers(see Figure 32).Once the team identified a set of initiatives with t

218、he highest potential savings,it set up a task force to chart progress on each one,including negotiation developments and final outcomes.The task force also used cutting-edge software tools to identify further cost-reduction opportunities.Targeted negotiations helped the company renegotiate existing

219、contracts on components such as semiconductors and displays within weeks of the initial project,with many contracts yielding higher-than-expected savings.Had the leadership team not acted,inflationary pressure would have triggered cost increases.More broadly,the teams effort analyzing its procuremen

220、t processes prompted a shift in mindset and big efficiency gains in purchasing and supplier management.In total,the company Figure 32:Clean-sheet costing at an electronics company revealed a wide scope to renegotiate component costsSource:Bain analysisComponent cost breakdown vs.current price(indexe

221、d to 100)Primary rawmaterials20 Secondaryraw materials5 Processingcosts21Yieldloss6Transportcost9Profitmargin6Fair cost67Additionalpremium33Currentprice100Asia-Pacific Private Equity Report 202336identified$10 million in savings opportunities.Category managers,eager to replicate the positive results

222、 in other purchase areas,started to regularly identify negotiation opportunities in procurement.Supply chainCovid-related supply chain disruptions have prompted many leadership teams to rethink their networks and increase supply resilience.In fact,supply chain optimization can reduce costs by making

223、 fulfillment more efficient and reducing working capital requirements.It also can bolster topline growth by improving service.Take the case of a global private equity firm that acquired a pharmaceutical company in India with the goal of building leading industry platforms for active pharmaceutical i

224、ngredients and contract development and manufacturing.As a first step,the fund implemented a cost-optimization program to improve procurement,manufacturing,and supply chain efficiency.Addressing the supply chain,the fund manager launched several initiatives in logistics.A route-by-route benchmarking

225、 exercise identified opportunities to trim costs in air and sea freight(see Figure 33).The optimized road transport analysis included truck size and utilization,packaging,dispatch frequency,and reverse logistics for returns,recalls,and recycling.The company is now working on a plan to realize the sa

226、vings,optimize further,and improve supply chain resilience.The leadership teams goal is a more accurate and integrated view of Figure 33:Benchmarking identified significant savings opportunities at a pharmaceutical companySource:Bain analysisCurrent freight rate vs.benchmark rate for highest-volume

227、routesCurrentfreightBenchmarkfreightrateRoute1Route2Route3Route4Route5Route6Route7Route8Route 912%10%7%7%5%5%4%4%3%Shareof totalvolume 27%savingsopportunity18%savingsopportunityAsia-Pacific Private Equity Report 202337demand forecasting,inventory management,and sales and operations planning to impro

228、ve cost management and reduce the risk of supply chain disruptions.Corporate supportEvery fund manager knows that reducing general and administrative costs can expand margins and boost returns.But optimizing support functions also can create value beyond cost savings,including speed,accuracy,and inn

229、ovation.Automation can help bring about those gains.When a global PE fund acquired an Asia-Pacific regional airline in the wake of Covid-19,it had to move fast to transform costs in order to survive the collapse in air traffic and reshape operations to thrive in the long term.The fund launched multi

230、ple cost and topline initiatives,redesigned the organization,and set up a transformation and results delivery office.Every fund manager knows that reducing general and administrative costs can expand margins and boost returns.But optimizing support functions also can create value beyond cost savings

231、,including speed,accuracy,and innovation.Automation can help bring about those gains.One of the most successful initiatives was a zero-based redesign of head office costs,which had built up significantly and outstripped those of peers.The leadership team first reviewed all the companys activities an

232、d how they were performed,then established an optimal size for each function and subfunction.The process led to a one-time reduction of cost and complexity,particularly in the sales function,which was restructured into smaller groups with fewer spans and layers.In the wake of Covid,the company reduc

233、ed headquarters staff in order to maintain a constant level of workers per aircraft,a move that reduced costs by 40%.Cost leaders know its critical to base headcount reductions on an effective redesign rather than simple benchmarking.Companies that fail to think through the implications may find the

234、 organization unable to perform some critical tasks or suffering from quality problems.When redesigning an organization or a function,successful companies assess which tasks would be more efficient if automated.By conducting an expert review of more than 70 processes in six functions,the airline com

235、pany identified 100 subfunctional activities that could be automated,allowing the same functions to be carried out at lower cost.The performance improvement program continued to bolster the bottom line when flight activity rebounded.New structures and processes allowed Asia-Pacific Private Equity Re

236、port 202338the airline to increase capacity when travel restrictions were eased,without adding to headcountand laid the foundation to generate new efficiencies as the company grows.For many PE firms investing in the Asia-Pacific region,taking a hands-on approach to improving portfolio company perfor

237、mance may seem arduous.However,the macroeconomic winds are no longer providing companies in the region with a powerful tailwind.In the coming years,PE funds that excel at improving cost management and efficiency in their portfolio companies will be able to create value even during a downturn.Top-per

238、forming funds have already started down that path.Asia-Pacific Private Equity Report 202339Market definitionThe Asia-Pacific private equity market as defined for this reportIncludes:Investments and exits with announced value of more than$10 million Investments and exits completed in the Asia-Pacific

239、 region:Greater China(China,Taiwan,Hong Kong,and Macau),India,Japan,South Korea,Australia and New Zealand,Southeast Asia (Singapore,Indonesia,Malaysia,Thailand,Vietnam,the Philippines,Laos,Cambodia,Brunei,and Myanmar),and other countries in the region Investments that have closed and those at the ag

240、reement-in-principle or definitive agreement stageExcludes:Franchise funding,seed,and R&D deals Any non-PE,non-VC deals(including M&A and consolidations)Real estate and real estate investment trusts About Bain&Companys Private Equity businessBain&Company is the leading consulting partner to the priv

241、ate equity(PE)industry and its stakeholders.PE consulting at Bain has grown eightfold over the past 15 years and now represents about one-third of the firms global business.We maintain a global network of more than 2,000 experienced professionals serving PE clients.Our practice is more than triple t

242、he size of the next-largest consulting company serving PE firms.Bains work with PE firms spans fund types,including buyout,growth equity,infrastructure,real estate,and debt.We also work with hedge funds,as well as many of the most prominent institutional investors,including sovereign wealth funds,pe

243、nsion funds,endowments,and family investment offices.We support our clients across a broad range of objectives:Deal generation.We work alongside investors to develop the right investment thesis and enhance deal flow by profiling industries,screening targets,and devising a plan to approach targets.Du

244、e diligence.We help support better deal decisions by performing integrated due diligence,assessing revenue growth and cost-reduction opportunities to determine a targets full potential,and providing a post-acquisition agenda.Asia-Pacific Private Equity Report 202340Immediate post-acquisition.After a

245、n acquisition,we support the pursuit of rapid returns by developing strategic blueprints for acquired companies,leading workshops that align management with strategic priorities and directing focused initiatives.Ongoing value addition.During the ownership phase,we help increase the value of portfoli

246、o companies by supporting revenue enhancement and cost-reduction initiatives and refreshing their value-creation plans.Exit.We help ensure that investors maximize returns by preparing for exit,identifying the optimal exit strategy,preparing the selling documents and prequalifying buyers.Firm strateg

247、y and operations.We help PE firms develop distinctive ways to achieve continued excellence by devising differentiated strategies,maximizing investment capabilities,developing sector specialization and intelligence,enhancing fund-raising,improving organizational design and decision making,and enlisti

248、ng top talent.Institutional investor strategy.We help institutional investors develop best-in-class investment programs across asset classes,including private equity,infrastructure,and real estate.Topics we address cover asset class allocation,portfolio construction and manager selection,governance

249、and risk management,and organizational design and decision making.We also help institutional investors expand their participation in private equity,including through coinvestment and direct investing opportunities.Bain&Company,Inc.131 Dartmouth Street Boston,Massachusetts 02116 USA Tel:+1 617 572 20

250、00 Bold ideas.Bold teams.Extraordinary results.Bain&Company is a global consultancy that helps the worlds most ambitious change makers define the future.Across 65 cities in 40 countries,we work alongside our clients as one team with a shared ambition to achieve extraordinary results,outperform the c

251、ompetition,and redefine industries.We complement our tailored,integrated expertise with a vibrant ecosystem of digital innovators to deliver better,faster,and more enduring outcomes.Our 10-year commitment to invest more than$1 billion in pro bono services brings our talent,expertise,and insight to o

252、rganizations tackling todays urgent challenges in education,racial equity,social justice,economic development,and the environment.Since our founding in 1973,we have measured our success by the success of our clients,and we proudly maintain the highest level of client advocacy in the industry.For more information,visit