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Asian Private Equity in Solid Rebound

Asian private equity attracted US$6.5 billion in 2004, the highest amount since 2001, according to Centre for Asia Private Equity Research Ltd., which publishes the trade journal, Asia Private Equity Review.

The sum represents a 50% increase to the US$4.3 billion recorded in 2003. It evidences a healthy Asian private equity industry that has not only recovered from its first and most extensive consolidation, but is also recording outstanding performance.

In 2004, buyout funds took up the lion’s share, accounting for 56% or US$3.7 billion of the US$6.5 billion of fresh capital. Funds for growth equity situations took up US$1.9 billion or 28%, while those for technology opportunities took up US$1.1 billion or 16%. For the latter two kinds of funds, their respective 2004 records represent the highest increase of capital since 2002. The trend also highlights investors’ regained confidence in Asia’s emerging market growth story as well as optimism on technology opportunities.

Mega Funds

Significantly, however, 2004 recorded the final closings and launch of mega funds, which have been absent from the Asian private equity scene since 2001. In November, Affinity Asia Pacific Fund II closed at US$700 million. It was the single largest buyout fund ever raised by an independent buyout management firm. HSBC Private Equity Fund II achieved a final closing at US$700 million, breaking the record as the single largest non-buyout fund. During the year CVC Asia Pacific, a leading buyout firm, also launched its second fund, at US$1 billion.

Private Equity Investments in 2004

Investments in Asian private equity registered in these 12 months stood at US$11.6 billion, virtually the same as 2003. Japan continued to assume the position as the largest private equity market, taking up 76.6% or US$6.6 billion of the year’s investment. Outside of Japan, a new investment pattern has emerged, with China and India the most-favoured investment destinations. China attracted US$1.3 billion, virtually the same as that in 2003. India saw a more than one-fold increase of private equity capital, at US$1.1 billion, coming into its market - an impressive jump compared to 2003’s US$530 million.

Private Equity Exits in 2004

“It is the outstanding divestment record that has drawn global institutional investors’ commitment to Asian private equity”, says Ms Kathleen Ng, managing director of Centre for Asia Private Equity Research Ltd. In 2004, 129 divestments were known to have been completed. The number represents a 55% increase to that recorded in 2003. Significantly, over 66% of the divestitures were profitable. The highest multiple achieved was 15.84 times while the best internal rate of return recorded was 1,648%. “The 2004 divestment record is a testimony to the strength and future prospects of Asian private equity, after having weathered its worst consolidation,” observes Ms Ng.

Asia Private Equity Review (APER) is the foremost voice on matters related to private equity/venture capital in the region. Well-recognised as being the singular source for accurate and timely news, in-depth analysis and global perspectives, APER is published by the Hong Kong-based Centre for Asia Private Equity Research. For further information please visit their website at www.asiape.com or email them at info@asiape.com