Despite the slowdown of private equity in Asia-Pacific, Japan experienced a 183% increase in deal value last year.

• In 2023, the total deal value for the Asia Pacific region decreased by more than 23% to $147 billion compared to the previous year, according to Bain & Company's report.
• In 2023, Japan experienced a 183% increase in deal value, becoming the largest private equity market in Asia Pacific, surpassing its previous position.
• In 2023, exits plummeted by 26% to $101 billion from the previous year, with 40% of these exits occurring through initial public offerings, according to Bain.

Since 2014, the total value of private equity deals in Asia Pacific has been at its lowest, due to a decrease in fundraising that reached a 10-year low. This decline occurred amid slowing growth, high interest rates, and volatile public markets, according to Bain & Company.

In 2023, Japan experienced a 183% increase in deal value, making it the largest private equity market in Asia Pacific, surpassing its previous position, according to Bain's 2024 Asia-Pacific Private Equity Report released Monday.

Bain stated that Japan is an attractive investment because of its numerous companies with "significant potential for performance improvements" and the pressure on Japan Inc to divest non-core assets due to corporate governance reform.

The decline in deal value in the Asia-Pacific region was more than 23% to $147 billion from the previous year, which is 35% below the 2018-2022 average value. This decline is consistent with the global slowdown and is nearly 60% lower than the $359 billion peak in 2021, according to Bain.

In 2023, the value of IPO exits in Asia Pacific decreased by 26% to $101 billion from the previous year, with 40% of the exits occurring through initial public offerings. Greater China accounted for 89% of the IPO exit value in the region, with the majority of listings taking place in Shanghai and Shenzhen. If we exclude Greater China IPOs, the total exit value in Asia Pacific was $65 billion.

Lachlan McMurdo, co-author of the firm's annual report, stated that while the outlook for exits in 2024 is uncertain, successful funds are not waiting for markets to bounce back. Instead, they are using strategy reviews to highlight the potential value of deals to buyers and paving the way for sales that meet their target returns.

This method can decrease the stock of old assets and give cash back to limited partners by 2024, even if the overall market for exits remains sluggish.

Private equity funds are increasingly exploring alternative asset classes, such as infrastructure operations with medium to high returns, including renewable energy storage, data centers, and airports, according to Bain.

Here are some highlights of the report:

• In 2019, the value of buyouts in Asia Pacific surpassed the value of growth deals for the first time since 2017, with buyouts accounting for 48% of the total deal value in the region.
• Although the pool of investors is shrinking, Bain stated that private equity returns are still more appealing than those from public markets over a five-, 10-, and 20-year timeframe.

Even though there were signs of some improvements toward the end of last year, Bain said that the timing of a recovery remains unclear. However, when the recovery does occur, generative artificial intelligence is among the new areas that hold "great promise," Bain added.

Private equity investment opportunities in Asia-Pacific markets, including Japan, India, and Southeast Asia, are viewed favorably by investors in the next 12 months, according to Bain, based on Preqin's 2023 survey.