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Despite expected softening of the crackdown, China will miss out on the Asian buyout boom

Image: Reuters Berita 24 English - Buyout funds are expected to extend their record spending spree in Asia into the second half of the year,...

Image: Reuters

Berita 24 English - Buyout funds are expected to extend their record spending spree in Asia into the second half of the year, but they will focus their efforts outside of China, where concerns about the economy are likely to outweigh any regulatory relief, according to dealmakers.

According to data from Dealogic, private equity mergers and acquisitions (M&A) activity in Asia, excluding Japan, had a record start to the year, with $167.4 billion spent in markets like Australia since January 1.

However, buyouts in China, Asia's largest deal market, slowed dramatically in 2022, as the two-month Shanghai lockdown and other coronavirus-related restrictions in various parts of the country harmed the economy and hampered possible transactions.

According to Dealogic statistics, acquisitions of Chinese properties backed by financial sponsors totaled just $1.5 billion this year, less than a tenth of the amount in the same period last year.

Dealmakers warned a sluggish deals market in China could affect private equity funds' investment returns and lead them to increase their M&A activity overseas. According to data source Preqin, funds in the region already have a record $642 billion in unspent cash, or 'dry powder.'

"Significant macroeconomic, geopolitical, and pandemic-related obstacles still exist in China," said Steven Tran, a partner at law firm Mayer Brown.

The record buyout deal value, on the other hand, hinted that some APAC-focused funds may be shifting more of their dry powder away from China and toward other regions of the region, he said.

ASIA-PACIFIC EX-JAPAN FINANCIAL SPONSOR INVOLVED IN M&A TRANSACTIONS Ex-Japan financial sponsor involved in M&A deals in Asia-Pacific (

Despite signals that Chinese regulators may be loosening restrictions on commercial sectors such as technology, dealmakers do not expect a surge in investment in the nation anytime soon.

According to Reuters, China's central leadership has granted Ant Group a provisional green light to restart its IPO.

"I don't think these (regulatory changes) would result in a significant return of private equity investment," said Richard Ji, chief investment officer of All-Stars Investment.

"China's high-quality assets, on the other hand, are currently undervalued. A regulatory U-turn will minimise asset discounting and uncertainty, making it easier to value investments "Ji, who is also the managing partner of the business, which specialises in the tech and consumer sectors, said this.


Though China has been quiet on the deal front, Preqin reports that fresh private equity capital raising in Asia has reached $30.4 billion so far this year.

The largest PE-backed buyout in Asia this year was an unsolicited near-$15 billion bid for Australia's Ramsay Health Care Ltd by a group led by KKR & Co in April.

As its private equity backers TPG and MBK seek to exit, a number of funds are considering to offer for Hong Kong telecoms operator HKBN Ltd, according to three people familiar with the situation who declined to be identified because the information is not public.

TPG, HKBN, and MBK all declined to comment.

According to Samson Lo, Co-head of Asia Pacific M&A at UBS, market fears have driven some PE firms to seek buyers for their portfolio companies that were originally looking for an IPO.

"Private equity firms continue to have a lot of money, and any deal in any sector today would attract more than ten private equity bidders in the first round."

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